SEACOR HOLDINGS INC /NEW/

Transcription

SEACOR HOLDINGS INC /NEW/
FORM 10-K
(Annual Report)
Filed 02/24/12 for the Period Ending 12/31/11
Address
Telephone
CIK
Symbol
SIC Code
Industry
Sector
Fiscal Year
2200 ELLER DRIVE
PO BOX 13038
FORT LAUDERDALE, FL 33316
954 523-2200
0000859598
CKH
4412 - Deep Sea Foreign Transportation of Freight
Water Transportation
Transportation
12/31
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
Table of Contents
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-12289
SEACOR Holdings Inc.
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
13-3542736
(I.R.S. Employer
Identification No.)
2200 Eller Drive, P.O. Box 13038,
Fort Lauderdale, Florida
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code (954) 523-2200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
33316
(Zip Code)
Name of Each Exchange on Which Registered
New York Stock Exchange
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. _ Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes _ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _ Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). _
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer _
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes _ No
The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2011 was approximately $2,027,926,905 based on the closing price on the New York
Stock Exchange on such date. The total number of shares of Common Stock issued and outstanding as of February 17, 2012 was 20,950,236.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2012 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “Commission”)
pursuant to Regulation 14A within 120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
SEACOR HOLDINGS INC.
FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Business
1
General
1
Segment and Geographic Information
2
Offshore Marine Services
2
Aviation Services
8
Inland River Services
14
Marine Transportation Services
19
Environmental Services
21
Commodity Trading and Logistics
23
Other
24
Government Regulation
25
Industry Hazards and Insurance
33
Employees
33
Item 1A.
Risk Factors
33
Item 1B.
Unresolved Staff Comments
47
Item 2.
Properties
47
Item 3.
Legal Proceedings
47
Item 4.
Mine Safety Disclosures
50
Executive Officers of the Registrant
50
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
51
Market for the Company’s Common Stock
51
Performance Graph
52
Table of Contents
Issuer Repurchases of Equity Securities
53
Issuance of Unregistered Securities
53
Item 6.
Selected Financial Data
54
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
55
Overview
55
Consolidated Results of Operations
57
Liquidity and Capital Resources
85
Effects of Inflation
91
Contingencies
91
Related Party Transactions
94
Critical Accounting Policies and Estimates
95
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
99
Item 8.
Financial Statements and Supplementary Data
101
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
101
Item 9A.
Controls and Procedures
101
Item 9B.
Other Information
101
PART III
Item 10.
Directors and Executive Officers and Corporate Governance
102
Item 11.
Executive Compensation
102
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
102
Item 13.
Certain Relationships and Related Transactions, and Director Independence
102
Item 14.
Principal Accountant Fees and Services
102
PART IV
Item 15.
Exhibits and Financial Statement Schedules
103
Table of Contents
FORWARD-LOOKING STATEMENTS
Certain statements discussed in Item 1 (Business), Item 1A (Risk Factors), Item 3 (Legal Proceedings), Item 7 (Management’s Discussion
and Analysis of Financial Condition and Results of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and
elsewhere in this Annual Report on Form 10-K as well as in other materials and oral statements that the Company releases from time to time to
the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forwardlooking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and
financial condition and other similar matters involve significant known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements
discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors are discussed in Item 1A (Risk
Factors). In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of
1995. It should be understood that it is not possible to predict or identify all such factors. Consequently, the following should not be considered
to be a complete discussion of all potential risks or uncertainties. The words “anticipate,” “estimate,” “expect,” “project,” “intend,”
“believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Forward-looking
statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide
any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events,
conditions or circumstances on which the forward-looking statement is based. It is advisable, however, to consult any further disclosures the
Company makes on related subjects in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and
Exchange Commission.
PART I
ITEM 1.
BUSINESS
General
Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us” and the “Company” refer to SEACOR Holdings Inc. and its
consolidated subsidiaries. “SEACOR” refers to SEACOR Holdings Inc., incorporated in 1989 in Delaware. “Common Stock” refers to the
common stock, par value $.01 per share, of SEACOR. The Company’s fiscal year ended on December 31, 2011.
The Company is in the business of owning, operating, investing in and marketing equipment, primarily to support offshore oil and gas
activity, industrial aviation, and inland and coastal marine transportation industries. The Company operates a worldwide fleet of vessels and
helicopters servicing oil and gas exploration, development and production facilities and U.S.-flag product tankers that transport petroleum,
chemicals and crude products primarily in the U.S. domestic “coastwise” trade. In addition, the Company operates a fleet of inland river barges
and towboats transporting grain, liquids and other bulk commodities on the U.S. Inland River Waterways. The Company’s environmental
services segment primarily provides emergency preparedness and response services to oil, chemical, industrial and marine transportation clients,
and government agencies in the United States and abroad. The Company’s commodity trading and logistics segment is an integrated business
involved in the purchase, storage, transportation and sale of energy and agricultural commodities.
SEACOR’s principal executive office is located at 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and its telephone
number is (954) 523-2200. SEACOR’s website address is www.seacorholdings.com . The reference to SEACOR’s website is not intended to
incorporate the information on the website into this Annual Report on Form 10-K.
The Company’s Corporate Governance policies, including the Board of Directors’ Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee charters are available, free of charge, on SEACOR’s website or in print for stockholders.
1
Table of Contents
All of the Company’s periodic report filings with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, are available, free of charge, on SEACOR’s website, including its Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports. These reports and
amendments are available on SEACOR’s website as soon as reasonably practicable after the Company electronically files the reports or
amendments with the SEC. They are also available at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Information as to the operation of the SEC’s Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains
a website (www.sec.gov) that contains reports, proxy and information statements and other information.
Segment and Geographic Information
The Company’s operations are divided into six main business segments: Offshore Marine Services, Aviation Services, Inland River
Services, Marine Transportation Services, Environmental Services and Commodity Trading and Logistics. The Company also has activities that
are referred to and described under Other, which primarily consists of Harbor and Offshore Towing Services, various other investments in joint
ventures and lending and leasing activities. Financial data for segment and geographic areas is reported in Part IV “Note 16. Major Customers
and Segment Information” of this Annual Report on Form 10-K.
Business
Offshore Marine Services operates a diverse fleet of support vessels primarily servicing offshore oil and gas exploration, development and
production facilities worldwide. The vessels deliver cargo and personnel to offshore installations; handle anchors and mooring equipment
required to tether rigs to the seabed; tow rigs and assist in placing them on location and moving them between regions and carry and launch
equipment such as remote operated vehicles or “ROVs” used underwater in drilling, well-completion and emergencies. In addition to supporting
drilling activities, Offshore Marine Services’ vessels support offshore construction and maintenance work, provide accommodations for
technicians and specialists, provide standby safety support and emergency response services. On December 22, 2011, Offshore Marine Services
acquired a controlling interest in a business that owns and operates vessels primarily used to move personnel and supplies to offshore wind
farms. Offshore Marine Services also offers logistics services in support of offshore oil and gas exploration, development and production
operations, including shore bases, marine transport and other supply chain management services. Offshore Marine Services contributed 18%,
19% and 33% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
Subsequent to December 31, 2011, the Company reached an agreement to acquire 18 lift boats from Superior Energy Services, LLC and
affiliates for $134.0 million plus a to be determined amount for working capital. The agreement is subject to certain conditions, including
regulatory approval, and is expected to be completed prior to the end of the second quarter of 2012.
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Table of Contents
Equipment and Services
The following tables identify the types of vessels that comprise Offshore Marine Services’ fleet as of December 31 for the indicated years.
“Owned” are those majority owned by the Company. “Joint Ventured” are those owned by entities in which the Company does not have a
controlling interest. “Leased-in” may be either vessels contracted from leasing companies to which the Company may have sold such vessels, or
vessels chartered-in from other third party owners. “Pooled” are owned by entities not affiliated with Offshore Marine Services with the
revenues or results of operations of these vessels being shared with the revenues or results of operations of certain vessels of similar type owned
by Offshore Marine Services based upon an agreed formula. “Managed” are owned by entities not affiliated with the Company but operated by
Offshore Marine Services for a fee. See Glossary of Vessel Types below for an explanation of the services they perform.
2011
Anchor handling towing supply
Crew
Mini-supply
Standby safety
Supply
Towing supply
Specialty
Wind farm utility
2010
Crew
Mini-supply
Standby safety
Supply
Towing supply
Specialty
2009
Crew
Mini-supply
Standby safety
Supply
Towing supply
Specialty
(1)
Owned (1)
Joint
Ventured
14
32
5
25
10
2
3
28
119
Owned Fleet
U.S.Flag
Leased-in
Pooled or
Managed
Total
Average
Age
2
7
1
1
—
1
5
—
17
3
7
2
—
10
2
—
1
25
—
3
—
—
10
—
3
—
16
19
49
8
26
30
5
11
29
177
11
12
11
31
9
9
15
3
14
12
17
1
—
6
—
—
—
36
2
15
4
25
4
2
3
28
83
15
40
5
25
11
4
4
104
2
2
1
1
—
1
5
12
2
7
3
—
7
2
—
21
1
3
—
—
9
1
3
17
20
52
9
26
27
8
12
154
9
12
10
31
8
13
20
16
13
21
1
—
7
—
—
42
2
19
4
25
4
4
4
62
18
41
6
24
11
7
4
111
1
2
—
1
—
3
5
12
1
11
5
—
8
2
—
27
3
3
—
—
8
1
—
15
23
57
11
25
27
13
9
165
9
12
10
32
7
8
19
15
15
25
3
—
7
—
—
50
3
16
3
24
4
7
4
61
Excludes one vessel acquired in 2010 but not operational until 2012.
3
ForeignFlag
Table of Contents
The following table indicates average fleet age of owned vessels in years as of December 31, excluding wind farm utility vessels:
Excluding standby safety vessels
Including standby safety vessels
2011
2010
2009
11
17
12
16
11
15
Glossary of Vessel Types
Anchor handling towing supply (“AHTS”) vessels are used primarily to support offshore drilling activities in the towing, positioning and
mooring of drilling rigs and other marine equipment. AHTS vessels are also used to transport supplies and equipment from shore bases to
offshore drilling rigs, platforms and other installations. The defining characteristics of AHTS vessels are horsepower (“bhp”), size of winch in
terms of “line pull” and wire storage capacity. Offshore Marine Services’ fleet of AHTS vessels has varying capabilities and supports offshore
mooring activities in water depths ranging from 300 to 8,000 feet. Most modern AHTS vessels are equipped with dynamic positioning (“DP”)
systems 1 to enable them to maintain a fixed position in close proximity to a rig or platform. As of December 31, 2011, of the 14 owned AHTS
vessels, eight were equipped with DP-2 and two were equipped with DP.
Crew boats are used primarily to move cargo and personnel to and from offshore drilling rigs, platforms and other installations.
Historically, crew boats transported people and were also used to deliver “light” cargo such as personal effects, small machinery and small
quantities of fuel and water. These boats also served as field standby vessels, moving personnel between platforms and providing emergency
stand-by services. Older crew boats are generally 100 to 130 feet in length and are capable of 20 knots speed in light conditions and calm seas.
Vessels built since 1998, also referred to as Fast Support Vessels (“FSVs”), range from 130 to 200 feet in length and are capable of speeds
between 25 and 35 knots and have enhanced cargo carrying capacities enabling them to support both drilling operations and production services.
Newer FSVs support deepwater drilling and production and are equipped with DP-2, firefighting equipment and ride control systems for greater
comfort and performance. As of December 31, 2011, of the 32 owned crew vessels, five were equipped with DP-2 and five were equipped with
DP.
Mini-supply vessels are approximately 145 to 165 feet in length and typically carry deck cargo, liquid mud, methanol, diesel fuel and
water. These vessels are typically used to support construction projects, maintenance work, certain drilling support activities and production
support. In this vessel class, the new generation of vessels is also equipped with DP capability. As of December 31, 2011, of the five owned
mini-supply vessels, three were equipped with DP.
Standby safety vessels typically remain on location proximate to offshore rigs and production facilities to respond to emergencies. These
vessels carry special equipment to rescue personnel and are equipped to provide first aid and shelter. These vessels sometimes perform a dual
role, also functioning as supply vessels.
Supply vessels and towing supply vessels are generally more than 200 feet in length and are used to deliver cargo to rigs and platforms
where drilling and work-over activity is underway or to support construction work by delivering pipe to vessels performing underwater
installations. Supply vessels are distinguished from other vessels by the total carrying capacity (expressed as deadweight: “dwt”), available area
of clear deck space, below-deck capacity for storage of mud and cement used in the drilling process and tank storage for water and fuel oil.
Larger supply vessels usually have deck fittings to assist in handling cargo and are often fitted with a
1
The most technologically advanced DP systems have enhanced redundancy in the vessel’s power, electrical, computer and reference systems enabling vessels to maintain accurate
position-keeping even in the event of failure of one of those systems (“DP-2”) and, in some cases, additionally in the event of fire and flood (“DP-3”).
4
Table of Contents
crane. The ability to hold station in open water and moderately rough seas is a key factor in differentiating supply vessels. To improve station
keeping ability, most modern supply vessels have DP capabilities. Accommodations are also an important feature of supply vessels. As drilling
becomes more complex, supply vessels often house third-parties who are specialists in various phases of the drilling process. Towing supply
vessels perform similar cargo delivery functions to those handled by supply vessels. They are, however, equipped with more powerful engines
(4,000 – 8,000 bhp) and winches, giving them the added capability to perform general towing functions, buoy setting and limited anchor
handling work. As of December 31, 2011, of the twelve owned supply and towing vessels, four were equipped with DP-2 and four were
equipped with DP.
Specialty vessels include anchor handling tugs; lift boats; accommodation, line handling and other vessels. These vessels generally have
specialized features adapting them to specific applications including offshore maintenance and construction services, freight hauling services and
accommodation services.
Wind farm utility vessels are used primarily to move personnel and supplies to offshore wind farms. There are two main types of vessels;
Windcats and Windspeeds. The Windcat series feature a catamaran hull with flush foredeck, providing a stable platform from which personnel
can safely transfer to turbine towers, and are capable of speeds between 25 and 31 knots. The Windspeed series are rapid response vessels with a
maximum speed of 38 knots, for light work during the construction and operational periods of offshore wind farms. All the wind farm utility
vessels have been built since 2004.
As of December 31, 2011, in addition to its existing fleet, Offshore Marine Services had new construction projects in progress including
one U.S.-flag, DP-2 AHTS vessel scheduled for delivery in the second quarter of 2012; two foreign-flag, DP-3 catamarans scheduled for
delivery in the first and third quarters of 2013; two U.S.-flag, DP-2 FSVs scheduled for delivery between the first and third quarters of 2014; two
foreign-flag supply vessels scheduled for delivery between the first and second quarters of 2012 and one foreign-flag wind farm utility vessel
scheduled for delivery in the second quarter of 2012. Subsequent to December 31, 2011 Offshore Marine Services placed a firm order for the
construction of four U.S.-flag, DP-2 supply vessels for delivery between the third quarter of 2013 and first quarter of 2015.
Markets
The demand for vessels supporting the offshore oil and gas industry is affected by the level of exploration and drilling activities, which in
turn is influenced by a number of factors including:
•
expectations as to future oil and gas commodity prices;
•
customer assessments of offshore drilling prospects compared with land-based opportunities;
•
customer assessments of cost, geological opportunity and political stability in host countries;
•
worldwide demand for oil and natural gas;
•
the ability of The Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing;
•
the level of production of non-OPEC countries;
•
the relative exchange rates for the U.S. dollar; and
•
various United States and international government policies regarding exploration and development of oil and gas reserves.
5
Table of Contents
Offshore Marine Services operates vessels in six principal geographic regions. From time to time, vessels are relocated between these
regions to meet customer demand for equipment. The table below sets forth vessel types by geographic market as of December 31 for the
indicated years. Offshore Marine Services sometimes participates in joint venture arrangements in certain geographical locations in order to
enhance marketing capabilities and facilitate operations in certain foreign markets allowing for the expansion of its fleet and operations while
diversifying risks and reducing capital outlays associated with such expansion.
United States, primarily U.S. Gulf of Mexico:
Crew
Mini-supply
Supply
Towing supply
Specialty
Africa, primarily West Africa:
Crew
Mini-supply
Supply
Towing supply
Specialty
Middle East:
Crew
Mini-supply
Supply
Towing supply
Specialty
Brazil, Mexico, Central and South America:
Crew
Mini-supply
Supply
Specialty
Europe, primarily North Sea:
Standby safety
Wind farm utility
2011
2010
2009
12
24
3
9
2
2
52
12
28
4
9
2
2
57
12
31
7
8
2
2
62
5
8
2
3
2
2
22
5
8
—
3
3
2
21
3
11
—
5
5
2
26
7
2
3
—
2
14
8
4
3
2
3
20
7
4
4
3
4
22
1
6
1
14
4
26
1
6
1
11
4
23
6
6
—
9
1
22
26
29
55
26
—
26
25
—
25
1
4
1
1
1
8
125
177
2
2
1
1
1
7
97
154
2
2
1
3
—
8
103
165
Asia:
Crew
Supply
Towing Supply
Specialty
Total Foreign Fleet
Total Fleet
6
Table of Contents
United States, primarily U.S. Gulf of Mexico. As of December 31, 2011, 52 vessels were operating in the U.S. Gulf of Mexico, including
28 owned, 18 leased-in, three joint ventured, two pooled and one managed. Offshore Marine Services’ expertise in this market is deepwater
anchor handling with its fleet of AHTS vessels, and exploration and production support with its fleet of crew and mini-supply vessels. Over the
last few years, the market has split between the traditional shallow water shelf and the deepwater markets. In both markets, customers focus on
price once they have identified a reliable operator who can provide available vessels with suitable capabilities for the job.
Africa, primarily West Africa. As of December 31, 2011, 22 vessels were operating in West Africa, including twelve owned, three leasedin, four joint ventured, one pooled and two managed. Offshore Marine Services operates primarily in Angola and Ghana, servicing large-scale,
multi-year projects for major oil companies. The other vessels in this region operate from ports in the Republic of the Congo, Gabon and
Equatorial Guinea.
Middle East. As of December 31, 2011, 14 vessels were operating in the Middle East region, including eleven owned, one leased-in and
two joint ventured. Offshore Marine Services’ vessels operating in this area generally support activities in Azerbaijan, Egypt and countries along
the Arabian Gulf and Arabian Sea, including the United Arab Emirates, Qatar and India.
Brazil, Mexico, Central and South America. As of December 31, 2011, 17 vessels were operating in Brazil, including seven owned and
ten managed, eight vessels were operating in Mexico, including one owned, two leased-in and five joint ventured. In addition, one owned vessel
was operating in Trinidad & Tobago.
Europe, primarily North Sea. As of December 31, 2011, 55 vessels were operating in the North Sea, including 53 owned, one leased-in
and one joint ventured. The North Sea fleet provides standby safety and supply services. Demand in the North Sea market for standby services
developed in 1991 after the United Kingdom passed legislation requiring offshore operators to maintain higher specification standby safety
vessels. The legislation requires a vessel to “stand by” to provide a means of evacuation and rescue for platform and rig personnel in the event of
an emergency at an offshore installation. Demand for wind farm utility vessels has developed as a result of the recent growth in offshore wind
turbines in the North Sea.
Asia. As of December 31, 2011, eight vessels were operating in Asia, including six owned and two joint ventured. Offshore Marine
Services’ vessels operating in this area generally support exploration programs. To date, Offshore Marine Services’ largest markets in this area
have been Vietnam and Indonesia.
Customers and Contractual Arrangements
The Offshore Marine Services segment earns revenues primarily from the time charter and bareboat charter of vessels to customers based
upon daily rates of hire. Under a time charter, Offshore Marine Services provides a vessel to a customer and is responsible for all operating
expenses, typically excluding fuel. Under a bareboat charter, Offshore Marine Services provides a vessel to a customer and the customer
assumes responsibility for all operating expenses and all risk of operation. Vessel charters may range from several days to several years. In the
U.S. Gulf of Mexico, time charter durations and rates are typically established in the context of master service agreements that govern the terms
and conditions of charter.
Offshore Marine Services’ principal customers are major integrated oil companies, large independent oil and gas exploration and
production companies and emerging independent companies. Consolidation of oil and gas companies through mergers and acquisitions over the
past several years has reduced Offshore Marine Services’ customer base. In 2011, no single customer of Offshore Marine Services was
responsible for 10% or more of consolidated operating revenues. The ten largest customers of Offshore Marine Services accounted for
approximately 50% of Offshore Marine Services’ operating revenues. The loss of one or a few of these customers could have a material adverse
effect on Offshore Marine Services’ results of operations.
7
Table of Contents
Competitive Conditions
Each of the markets in which Offshore Marine Services operates is highly competitive. The most important competitive factors are pricing
and the availability and specifications of equipment to fit customer requirements. Other important factors include service, reputation, flag
preference, local marine operating conditions, the ability to provide and maintain logistical support given the complexity of a project and the cost
of moving equipment from one geographical location to another.
Offshore Marine Services has numerous competitors in each of the geographical regions in which it operates, ranging from international
companies that operate in many regions to smaller local companies that typically concentrate their activities in one specific region.
Risks of Foreign Operations
For the years ended December 31, 2011, 2010 and 2009, 69%, 53% and 63%, respectively, of Offshore Marine Services’ operating
revenues were derived from its foreign operations.
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on Offshore Marine
Services’ financial position and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in
“Item 1A. Risk Factors.”
Aviation Services
Business
Aviation Services is one of the largest helicopter operators in the world and the longest serving helicopter transport operator in the United
States, which is its primary area of operation. Aviation Services is primarily engaged in transportation services to the offshore oil and gas
exploration, development and production industry. Its major customers are major integrated and independent oil and gas companies and U.S.
government agencies. In addition to serving the oil and gas industry, Aviation Services provides air medical services, firefighting support,
flightseeing tours in Alaska, and emergency search and rescue services.
Aviation Services operates a fixed base operation (“FBO”) at Ted Stevens Anchorage International Airport and a Federal Aviation
Administration (“FAA”) approved maintenance repair station in Lake Charles, Louisiana. Aviation Services has an interest in a sales and
manufacturing organization based in Canada that engineers, manufactures and distributes after-market helicopter parts and accessories, and has
an interest in a training center based in Lake Charles, Louisiana, that provides instruction, flight simulator and other training service.
Aviation Services contributed 12%, 9% and 14% of consolidated operating revenues in 2011, 2010 and 2009 respectively.
Aviation Services’ business is conducted through Era Group Inc., which filed a registration statement with the U.S. Securities and
Exchange Commission (“SEC”) on November 23, 2011, with the intention of proceeding with an initial public offering of a portion of its shares,
contingent upon, among other things, appropriate market conditions and receipt of certain approvals. Following any such offering, SEACOR
would retain majority voting control over Era Group Inc. There is no assurance that an offering will be consummated. For information about the
offering, refer to the most recent registration statement on Form S-1 filed by Era Group Inc. with the SEC, which can be found on the SEC’s
website (www.SEC.gov).
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Table of Contents
The following tables identify the types of aircraft that comprise Aviation Services’ fleet as of December 31 for the indicated years.
controlling interest. “Leased-in” are those leased-in under operating leases. “Managed” are those owned by entities not affiliated with the
Company but operated by Aviation Services for a fee. As of December 31, 2011, 127 aircraft were located in the United States and 48 were
located in foreign jurisdictions.
Light helicopters – twin engine:
A109
BK-117
BO-105
EC135
EC145
Medium helicopters:
AW139
Bell 212
Bell 412
Sikorsky 76 A/A++
Sikorsky 76 C/C++
Heavy helicopters:
EC225
Total Fleet
Cruise
Speed
(mph)
Approx.
Range
(miles)
Average
Age (3)
(years)
23
35
58
7
5
161
138
270
361
5
15
2
4
—
—
3
9
9
11
4
15
6
45
7
9
4
7
9
161
150
138
138
150
405
336
276
288
336
6
27
21
4
3
—
—
—
2
—
2
—
—
—
2
1
3
26
14
6
10
9
65
12
11
11
12
12
173
115
138
155
161
426
299
352
348
348
3
33
30
25
5
—
11
—
12
7
175
19
162
582
3
Joint
Ventured
Leased-in
Managed
Total
17
32
49
6
—
6
—
3
3
—
—
—
7
3
4
13
3
30
—
—
—
—
—
—
—
4
—
2
—
6
25
14
6
6
8
59
1
—
—
—
—
1
7
145
—
7
Owned
2011
Light helicopters – single engine:
A119
AS350
Max.
Pass. (2)
(1 )
(1)
Excludes one BO-105 removed from service, one EC225, two EC135s and four AW139s delivered in 2011 but not operational until 2012.
(2)
In typical configuration for Aviation Services’ operations.
(3)
For owned fleet.
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Table of Contents
Cruise
Speed
(mph)
Approx.
Range
(miles)
Average
Age (4)
(years)
23
37
60
7
5
161
138
270
361
5
14
2
4
—
—
3
9
9
11
7
12
6
45
7
9
4
7
9
161
150
138
138
150
405
336
276
288
336
4
26
23
5
2
—
—
—
2
—
2
—
—
—
2
1
3
22
15
6
10
9
62
12
11
11
12
12
173
115
138
155
161
426
299
352
348
348
3
32
29
24
4
—
—
—
11
—
—
—
12
3
6
9
176
19
19
138
162
497
582
41
2
Owned (1 )
Leased-in (2)
Managed
Total
17
34
51
6
—
6
—
3
3
—
—
—
7
3
7
10
3
30
—
—
—
—
—
—
—
4
—
2
—
6
22
15
6
6
8
57
—
—
—
—
—
—
3
6
9
147
—
—
—
6
2010
Light helicopters – single
engine:
A119
AS350
Light helicopters – twin
engine:
A109
BK-117
BO-105
EC135
EC145
Medium helicopters:
AW139
Bell 212
Bell 412
Sikorsky 76 A/A++
Sikorsky 76 C/C++
Heavy helicopters:
S61
EC225
Total Fleet
(1)
Max.
Pass. ( 3 )
Joint
Ventured
Excludes one EC-120 removed from service and one A119 that was not placed into service until 2011. During 2010, one S76A and one BO-105 were removed from service and
disassembled for spare parts.
(2)
Excludes three EC-120s removed from service.
(3)
(4)
For owned fleet.
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Cruise
Speed
(mph)
Approx.
Range
(miles)
Average
Age (4)
(years)
23
37
60
7
5
161
138
270
361
3
13
2
6
—
—
—
8
9
13
10
12
3
47
7
9
4
7
9
161
150
138
138
150
405
336
276
288
336
4
25
22
4
1
—
—
—
3
—
3
—
—
—
2
1
3
18
15
6
11
9
59
12
11
11
12
12
173
115
138
155
161
426
299
352
348
348
2
31
28
24
3
—
—
—
12
—
—
—
11
3
5
8
174
19
19
138
162
497
582
40
1
Owned (1 )
Leased-in (2)
Managed
Total
17
34
51
6
—
6
—
3
3
—
—
—
7
3
10
10
3
33
—
—
—
—
—
—
—
4
—
2
—
6
18
15
6
6
8
53
—
—
—
—
—
—
3
5
8
145
—
—
—
6
2009
Light helicopters – single
engine:
A119
AS350
Light helicopters – twin
engine:
A109
BK-117
BO-105
EC135
EC145
Medium helicopters:
AW139
Bell 212
Bell 412
Sikorsky 76 A/A++
Sikorsky 76 C/C++
Heavy helicopters:
S61
EC225
Total Fleet
(1)
Max.
Pass. ( 3 )
Joint
Ventured
Excludes one EC-120, one BK-117 and one BO-105 removed from service. Excludes one BK-117 that was removed from service as of December 31, 2009 disassembled for spare parts
in 2010.
(2)
Excludes three EC-120s removed from service.
(3)
(4)
For owned fleet.
Glossary of Helicopter Types:
•
Heavy helicopters, which have twin engines and a typical passenger capacity of 19, are primarily used in support of the deepwater
offshore oil and gas industry, frequently in harsh environments or in areas with long distances from shore, such as those in the North
Sea and Australia. Heavy helicopters are also used to support search and rescue operations.
•
Medium helicopters, which mostly have twin engines and a typical passenger capacity of eleven to twelve, are primarily used to
support the offshore oil and gas industry, search and rescue and air medical services, firefighting activities and corporate uses.
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•
Light helicopters, which may have single or twin engines and a typical passenger capacity of four to nine, are used to support a wide
range of activities, including shallow-water oil and gas exploration, development and production, the mining industry, power line and
pipeline surveying, air medical services, tourism and corporate uses.
Medium and heavy helicopters fly longer distances at higher speeds, can carry heavier payloads than light helicopters and are usually
equipped with sophisticated avionics permitting them to operate in more demanding weather conditions and difficult climates. Medium and
heavy helicopters are most commonly used for crew changes on large offshore production facilities and drilling rigs servicing the oil and gas
industry. They are the preferred helicopter in international offshore markets, where facilities tend to be larger, the drilling locations more remote,
and onshore infrastructure more limited.
As of December 31, 2011, in addition to its existing fleet, Aviation Services had one Eurocopter EC225, two Eurocopter EC135s and four
AgustaWestland AW139s that were delivered in 2011 and will become operational in 2012. As of December 31, 2011, Aviation Services had
placed orders for twelve new helicopters, consisting of one EC225 heavy helicopter, four AW139 medium helicopters, five AgustaWestland
AW169 light twin helicopters and two EC135 light twin helicopters. The EC225, the AW139s and the EC135s are scheduled to be delivered in
2012. Delivery dates for the AW169s have yet to be determined. In addition, Aviation Services had outstanding options to purchase up to an
additional 15 AW139 medium helicopters. If these options are exercised, the helicopters will be delivered beginning in 2012 through 2015.
Markets
Aviation Services’ current principal markets for its transportation and search and rescue services supporting the offshore oil and gas
exploration, development and production industry are in the U.S. Gulf of Mexico and Alaska. In addition, Aviation Services currently conducts
international operations in support of oil and gas exploration, development and production activity, primarily in Brazil, parts of Europe, Asia and
Mexico.
Demand for helicopters in support of the offshore oil and gas exploration, development and production, both in the United States and
internationally, is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors,
including:
•
expectations as to future oil and gas commodity prices;
•
customer assessments of offshore drilling prospects compared with land-based opportunities;
•
customer assessments of cost, geological opportunity and political stability in host countries;
•
worldwide demand for oil and natural gas;
•
the ability of OPEC to set and maintain production levels and pricing;
•
the level of production of non-OPEC countries;
•
the relative exchange rates for the U.S. dollar; and
•
various United States and international government policies regarding exploration and development of oil and gas reserves.
Helicopter services to the oil and mining industries in Alaska are provided on a contract or charter basis from bases in Valdez, Anchorage,
the Kenai area and Deadhorse. In addition to supporting oil company activities in the Cook Inlet and along the North Slope of Alaska, Aviation
Services operates an FBO at Ted Stevens Anchorage International Airport, provides summer flightseeing tours and supports inland firefighting
and mining operations. Aviation Services’ air medical services operations are primarily in the northeastern United States and Florida. In
addition, Aviation Services contract-leases helicopters primarily to foreign operators in a number of locations in support of a wide variety of
activities, and, in some instances, supports their operations with technical assistance, maintenance programs and sourcing of parts.
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Table of Contents
Seasonality
A significant portion of Aviation Services’ operating revenues and profits related to oil and gas industry activity is dependent on actual
flight hours. The fall and winter months have fewer hours of daylight, particularly in Alaska and the North Sea, and flight hours are generally
lower at these times. In addition, prolonged periods of adverse weather in the fall and winter months, coupled with the effect of fewer hours of
daylight, can adversely impact operating results. In general, the months of December through February in the U.S. Gulf of Mexico and October
through April in Alaska have more days of adverse weather conditions than the other months of the year. In the U.S. Gulf of Mexico, June
through November is tropical storm season. During a tropical storm, Aviation Services is unable to operate in the area of the storm. However,
flight activity may increase immediately before and after a storm due to the evacuation and return of offshore workers. The Alaska flight-seeing
operation is also seasonal with activity occurring only from late May until early September. There is less seasonality in Aviation Services’
contract-leasing activities.
Aviation Services’ principal customers in the U.S. Gulf of Mexico are major integrated and independent exploration and production
companies and U.S. government agencies, primarily The Bureau of Safety and Environmental Enforcement (“BSEE”), a division of the U.S
Department of the Interior. In Alaska, Aviation Services’ principal customers are oil and gas companies, mining companies and cruise line
passengers. Internationally, Aviation Services typically contract-leases helicopters to local companies that operate Aviation Services’ helicopters
under their own operating certificates. These companies in turn provide helicopter transportation services to oil and gas companies and other
governmental agencies.
Aviation Services charters the majority of its helicopters through master service agreements, subscription agreements, day-to-day charter
arrangements and contract-leases. Master service agreements and subscription agreements typically require a fixed monthly fee plus incremental
payments based on hours flown. These agreements have fixed terms ranging from one month to five years and generally may be cancelled upon
30-days notice. Day-to-day charter arrangements call for either a combination of a daily fixed fee plus a charge based on hours flown or an
hourly rate with a minimum number of hours to be charged. Contract-leases generally run from two to five years with no early cancellation
provisions and can include only the equipment, or can include the equipment, logistical and maintenance support, insurance and personnel, or a
combination thereof. Aviation Services’ oil and gas contracts typically contain terms that limit its exposure to increases in fuel costs over a preagreed level. Fuel costs in excess of these levels are passed through to customers. With respect to flightseeing aircraft, block space is allocated to
cruise lines and seats are sold directly to customers. Aviation Services’ fixed based operation sells fuel on an ad hoc basis. Air medical services
are provided under contracts with hospitals that typically include either a fixed monthly and hourly rate structure or a fee per completed flight.
Other markets include international oil and gas industry support activities, agricultural support and general aviation activities.
In 2011, no single customer of Aviation Services was responsible for 10% or more of consolidated operating revenues. The ten largest
customers of Aviation Services accounted for approximately 59% of Aviation Services’ operating revenues in 2011. The loss of one or a few of
its customers could have a material adverse effect on Aviation Services’ results of operations.
The helicopter industry is highly competitive. The primary barriers to effective competitive entry include existing customer relationships,
an established safety record, knowledge of site characteristics and access to appropriate facilities. Customers evaluate Aviation Services against
its competitors based on a number of factors, including price; safety record; reliability of service; availability, adaptability and type of
equipment; flexibility to provide incremental aircraft and different models from those primarily required and operational experience.
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Table of Contents
In the U.S. Gulf of Mexico, Aviation Services has many competitors, including several customers that operate their own helicopter fleets
and smaller companies that offer services similar to those offered by Aviation Services. In Alaska, Aviation Services competes against a large
number of operators and in Brazil, Aviation Services has several primary competitors.
In air medical services, there are several major competitors with fleets dedicated to air medical operations. Aviation Services competes
against national and regional firms, and there is usually more than one competitor in each local market. In addition, Aviation Services competes
against hospitals that operate their own helicopters and, in some cases, against ground ambulances.
Aviation Services’ contract-leasing business competes against financial leasing companies.
Aviation Services operates worldwide. For the years ended December 31, 2011, 2010 and 2009, 28%, 24% and 15%, respectively, of
Aviation Services’ operating revenues were derived from its foreign operations.
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on Aviation Services’
financial position and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in “Item 1A.
Risk Factors.”
Business
Inland River Services owns, operates, invests in and markets river transportation equipment primarily used for moving agricultural and
industrial commodities, and chemical and petrochemical products, on the U.S. Inland River Waterways, primarily the Mississippi River, Illinois
River, Tennessee River, Ohio River and their tributaries, and the Gulf Intracoastal Waterways. Inland River Services owns towboats used for
moving barges, fleeting operations and deck barges. Internationally, Inland River Services has interests in a transshipment terminal at the Port of
Ibicuy, Argentina and operations on the Parana-Paraguay Rivers in Argentina and the Magdalena River in Colombia. In addition to its primary
barge business, Inland River Services also has interests in high-speed multi-modal terminal facilities and provides a broad range of services
including machine shop, gear and engine repairs, repair of barges and towboats at strategic locations on the U.S. Inland River Waterways.
Inland River Services contributed 9%, 6% and 9% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
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Table of Contents
The following tables identify the types of equipment that comprise Inland River Services’ fleet as of December 31 for the indicated years.
controlling interest. “Leased-in” are those leased-in under operating leases. “Pooled or Managed” are owned by entities not affiliated with Inland
River Services with operating revenues and voyage expenses pooled with certain barges of similar type owned by Inland River Services and the
net results allocated to participants based upon the number of days the barges participate in the pool or are owned by entities not affiliated with
the Company but operated by Inland River Services for a fee. For “Pooled” barges, each barge owner is responsible for the costs of insurance,
maintenance and repair as well as for capital and financing costs of its own equipment in the pool.
Owned (1)
Joint
Ventured
Leased-in
Pooled or
Managed
689
69
20
16
—
794
172
—
—
15
1
188
2
—
—
—
—
2
633
8
—
—
—
641
1,496
77
20
31
1
1,625
634
68
26
17
—
745
172
—
—
15
1
188
2
2
—
—
—
4
580
10
—
—
—
590
1,388
80
26
32
1
1,527
581
51
26
17
—
675
262
34
—
12
1
309
2
2
—
—
—
4
550
—
—
—
—
550
1,395
87
26
29
1
1,538
Total
2011
Inland river dry cargo barges
Inland river liquid tank barges
Inland river deck barges
Inland river towboats
Dry cargo vessel ( 2 )
2010
2009
(1)
Excludes three dry cargo barges and two towboats delivered in 2011 but not operational until 2012.
(2)
Argentine-flag.
15
Table of Contents
The table below sets forth equipment types by geographic market as of December 31 for the indicated years.
United States:
4,000 hp – 6,250 hp
3,300 hp – 3,900 hp
1,700 hp – 3,200 hp
South America:
4,000 hp – 6,250 hp
1,700 hp – 3,200 hp
Dry-cargo vessel
2011
2010
2009
1,318
73
20
1,216
80
26
1,283
87
26
9
1
12
1,433
9
1
13
1,345
9
1
13
1,419
178
4
172
—
112
—
7
2
1
192
1,625
7
2
1
182
1,527
4
2
1
119
1,538
As of December 31 of the indicated year, the average age (in years) of Inland River Services’ owned and joint ventured fleet was as
follows:
Dry cargo barges
Liquid tank barges – 10,000 barrel
Liquid tank barges – 30,000 barrel
Deck barges
Towboats (1)
(1)
2011
2010
2009
6
15
11
4
37
6
14
10
3
37
6
19
9
2
35
Towboats have been upgraded and maintained to meet or exceed current industry standards.
Inland barges are unmanned and are moved on the U.S. Inland River Waterways by towboats. The combination of a towboat and dry cargo
barges is commonly referred to as a “tow.” The Inland River Services dry cargo fleet consists of hopper barges, which can be “open tops” for the
transport of commodities that are not sensitive to water such as coal, aggregate and scrap, or covered for the transport of products such as grain,
ores, alloys, cements and fertilizer. Each dry cargo barge in the Inland River Services’ fleet is capable of transporting approximately 1,500 to
2,000 tons (1,350 to 1,800 metric tons) of cargo. The carrying capacity of a barge at any particular time is determined by water depth in the river
channels and hull depth of the barge. Adverse river conditions, such as high water resulting from excessive rainfall or low water caused by
drought, can also impact operations by limiting the speed at which tows travel the U.S. Inland River Waterways, the number of barges included
in tows and the quantity of cargo that is loaded in the barges.
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Table of Contents
A typical dry cargo voyage begins by shifting a clean, empty barge from a fleeting location to a loading facility. The barge is then moved
from the loading location and assembled into a tow before proceeding to its discharge destination. After unloading, it is shifted to a fleeting area
for cleaning and service, if needed, before being placed again at a load facility. Typically, grain cargos move southbound and non-grain cargos
move northbound. Generally, Inland River Services attempts to coordinate the logistical match-up of northbound and southbound movements of
cargo to minimize repositioning costs.
Inland River Services’ fleet of 10,000 barrel liquid tank barges transports liquid bulk commodities such as lube oils, solvents and glycols.
The operations of these barges are similar to those of the dry cargo barges described above. Inland River Services’ fleet of 30,000 barrel liquid
tank barges transports refined petroleum products and black oil products and are normally chartered-out as “unit tows” consisting of two to three
barges along with a towboat working in patterns prescribed by the customer. Inland River Services is responsible for providing manpower for the
towboats working in such operations.
As of December 31, 2011, in addition to its existing fleet, Inland River Services had new construction projects in progress for four 30,000
barrel liquid tank barges and three 10,000 barrel liquid tank barges all scheduled for delivery in 2012.
Markets
The market for Inland River Services is driven by supply and demand economics, which impacts prices, utilization and margins achieved
by Inland River Services’ assets. The relationship between supply and demand reflects many factors, including:
•
the level of domestic and international production of the basic agricultural products to be transported (in particular, the yield from
grain harvests);
•
the level of domestic and international consumption of agricultural products and the effect of these levels on the volumes of products
that are physically moved into the export markets;
•
the level of domestic and worldwide demand for iron ore, steel, steel by-products, coal, ethanol, petroleum and other bulk
commodities;
•
the strength or weakness of the U.S. dollar; and
•
the cost of ocean freight and the cost of fuel.
Within the United States and international markets, other local factors also have an effect on pricing and margins, including:
•
the supply of barges available to move the products;
•
the cost of qualified wheelhouse personnel;
•
the ability to position the barges to maximize efficiencies and utility in moving cargos both northbound and southbound;
•
the cost of alternative forms of transportation (primarily rail) and capacities at export facilities;
•
general operating logistics on the river network including size and operating status of locks and dams;
•
the effect of river levels on the loading capacities of the barges in terms of draft restrictions; and
•
foreign and domestic laws and regulations.
Seasonality
During harsh winters the upper Mississippi River usually closes to barge traffic from mid-December to mid-March. Ice often hinders the
navigation of barge traffic on the mid-Mississippi River, the Illinois River and the upper Ohio River during the same period. The volume of grain
transported from the Midwest to the U.S. Gulf
17
Table of Contents
of Mexico, which is primarily for export, is greatest during the harvest season from mid-August through late November. The harvest season is
particularly significant to Inland River Services because pricing tends to peak during these months in response to higher demand for equipment.
The principal customers for Inland River Services are major agricultural companies, major integrated oil companies and industrial
companies. In 2011, no single customer of Inland River Services was responsible for 10% or more of consolidated operating revenues. The ten
largest customers of Inland River Services accounted for approximately 69% of Inland River Services’ revenues in 2011. The loss of one or a
few of its customers would be unlikely to have a material adverse effect on Inland River Services’ results of operations.
Most of Inland River Services’ dry cargo barges are employed under contracts of affreightment that can vary in duration, ranging from one
voyage to several years. For longer term contracts, base rates may be adjusted in response to changes in fuel prices and operating expenses.
Some longer term contracts provide for the transport of a minimum number of tons of cargo or specific transportation requirements for a
particular customer. Some barges are bareboat chartered-out to third parties for a fixed payment of hire per day for the duration of the charter.
These contracts tend to be longer, ranging in term from one to five years.
Inland River Services generally charges a price per ton for point to point transportation of dry bulk commodities. Customers are permitted
a specified number of days to load and discharge the cargo and thereafter pay a per diem demurrage rate for extra time. From time to time, dry
cargo barges may be used for storage for a period prior to delivery.
Inland River Services’ 10,000 barrel liquid tank barges are either chartered-out on term contracts ranging from one to five years or
marketed on the spot market.
Inland River Services’ 30,000 barrel liquid tank barges are either marketed as unit tows under term contracts ranging from one to five years
or in the spot market.
Inland River Services’ tank farm and handling facility is marketed on a tariff system driven by throughput volume.
Generally, Inland River Services believes the primary barriers to effective competitive entry into the U.S. Inland River Waterways markets
are the complexity of operations, the consolidation of the inland river towing industry and the difficulty in assembling a large enough fleet and
an experienced staff to execute voyages efficiently and re-position barges effectively to optimize their use. The primary competitive factors
among established operators are price, availability and reliability of barges and equipment of a suitable type and condition for a specific cargo.
Inland River Services’ main competitors are other barge lines. Railroads and liquid pipelines also compete for traffic that might otherwise
move on the U.S. Inland River Waterways.
The Company believes that 67% of the domestic dry cargo fleet is controlled by five companies and 58% of the domestic liquid barge
industry fleet is controlled by five companies.
Inland River Services’ foreign operations primarily consist of its joint ventures operating in foreign jurisdictions.
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Table of Contents
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on Inland River Services’
financial position and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in “Item 1A.
Risk Factors.”
Business
Marine Transportation Services’ fleet consists of seven U.S.-flag product tankers, of which five are owned and two are leased, providing
marine transportation services for petroleum products and chemicals moving in the U.S. domestic coastwise trade, and eight foreign-flag Rollon/Roll-off (“RORO”) vessels engaged in the shipping trade between the United States, the Bahamas and the Caribbean.
Marine Transportation Services contributed 4%, 3% and 5% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
The Oil Pollution Act of 1990 (“OPA 90”) prohibits vessels without double-hulls from transporting crude oil and petroleum products in
U.S. coastwise transportation after certain dates based on the age and carrying capacity of the vessel. In addition, single-hulled vessels will be
prohibited from transporting petroleum products in most international markets under a phase-out schedule established by the International
Maritime Organization (“IMO”). The table below sets forth Marine Transportation Services’ fleet of U.S.-flag double-hull product tankers as of
December 31, 2011.
Name of Vessel
Capacity
in barrels
Tonnage
in
“dwt” (1)
OPA 90
Retirement date
Seabulk Trader
Seabulk Challenge
California Voyager (2)
Oregon Voyager (2)
Seabulk Arctic
Mississippi Voyager
Florida Voyager
294,000
294,000
341,000
341,000
340,000
340,000
340,000
48,700
48,700
45,000
45,000
46,000
46,000
46,000
None
None
None
None
None
None
None
(1)
Deadweight tons or “dwt”.
(2)
Leased-in vessel.
Type
Double-hull
Double-hull
Double-hull
Double-hull
Double-hull
Double-hull
Double-hull
As of December 31, 2011, in addition to its existing fleet, Marine Transportation Services had a new construction project in progress for a
U.S.-flag articulated tug/barge unit scheduled for delivery in the second quarter of 2012 that will be owned by a joint venture in which Marine
Transportation Services has a 50% interest.
Markets
Petroleum Product Transportation. In the domestic energy trade, oceangoing vessels transport fuel and other petroleum products
primarily from refineries and storage facilities along the coast of the U.S. Gulf of Mexico to utilities, waterfront industrial facilities and
distribution facilities along the U.S. Gulf of Mexico, and the U.S. Atlantic and Pacific coasts. The number of U.S.-flag oceangoing vessels
eligible to participate in the U.S. domestic trade and capable of transporting fuel or petroleum products has fluctuated in recent years as vessels
have reached the end of their useful lives or have been retired due to OPA 90 requirements and newbuilds are placed into service.
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Chemical Transportation. In the U.S. domestic coastwise chemical transportation trade, vessels carry chemicals, primarily from chemical
manufacturing plants and storage facilities along the coast of the U.S. Gulf of Mexico to industrial users in and around U.S. Atlantic and Pacific
coast ports. The chemicals transported consist primarily of caustic soda, paraxylene, alkylates, toluene and lubricating oils. Some of the
chemicals must be carried in vessels with specially coated or stainless steel cargo tanks and many of them are sensitive to contamination and
require special cargo-handling equipment.
Cargo Liner Transportation. RORO vessels provide cargo transportation services to and from ports in Florida, the Bahamas and the
Caribbean for the shipment of consumer products, building materials, less-than-container loads and project cargo services.
The primary purchasers of petroleum product transportation services are multinational oil and gas companies, refining companies, oil
trading companies and large industrial consumers of fuel with waterfront facilities. The primary purchasers of chemical transportation services
are chemical and oil companies. Both services are generally contracted on the basis of short-term or long-term time charters, voyage charters,
and contracts of affreightment or other transportation agreements tailored to the shipper’s requirements. The primary purchasers of cargo liner
transportation services are individuals and businesses consuming U.S. export goods in the Bahamas and Caribbean. Marine Transportation
Services also provides ship management services to ship owners. In 2011, no single customer of Marine Transportation Services was responsible
for 10% or more of consolidated operating revenues. The ten largest customers of Marine Transportation Services accounted for approximately
81% of its operating revenues in 2011. The loss of one or a few of these customers could have a material adverse effect on Marine
Transportation Services’ results of operations.
Under a time charter, Marine Transportation Services provides a vessel to a customer and is responsible for all operating expenses,
typically excluding fuel and port charges. Under a bareboat charter, Marine Transportation Services provides a vessel to a customer and the
customer assumes responsibility for all operating expenses and all risk of operation. Vessel charters may range from several days to several
years. Voyage contracts are contracts to carry cargos on a single voyage basis regardless of time to complete. Contracts of affreightment are
contracts for cargos that are committed on a multi-voyage basis for various periods of time, with minimum and maximum cargo tonnages
specified over the period at a fixed or escalating rate per ton.
The markets in which the Marine Transportation Services fleet operates are highly competitive. Primary direct competitors are other
operators of U.S.-flag ocean-going tank vessels and chemical carriers, operators of articulated tug and barge units and operators of refined
product pipelines. The U.S. “Jones Act” shipping market is a trade that is not available to foreign-based competition. The most important
competitive factors are pricing, vessel age and vessel availability to fit customer requirements as well as customer preference for double-hull
vessels even though single hull vessels are still eligible to trade.
Marine Transportation Services’ foreign operations consist of its cargo liner transportation activities, which commenced operations in
April 2011.
For the year ended December 31, 2011, 25% of Marine Transportation Services’ operating revenues were derived from its foreign
operations.
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on Marine Transportation
Services’ financial position and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in
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Business
Environmental Services primarily provides emergency preparedness and response services to oil, chemical, industrial and marine
transportation clients, and government agencies in the United States and abroad. In the United States, these services are generally rendered to
those clients who store, transport, produce or handle petroleum and certain non-petroleum oils that are subject to the provisions of OPA 90 and
various other federal, state and municipal regulations. Internationally, these services may be required by legislation and regulation of countries,
international maritime conventions and environmental covenants placed on clients by their lending institutions. To a lesser extent, Environmental
Services provides emergency preparedness and response services to governmental agencies arising from natural disasters and homeland security
issues such as debris removal monitoring, public assistance projects, bio-terrorism, pandemic influenza and port security. Environmental
Services also provides other services to oil, chemical, industrial and government clients including crisis communications, emergency
preparedness and response software, hazardous waste management, standby fire-fighting, industrial and marine cleaning, salvage support,
petroleum storage tank cleaning and removal, and site remediation services.
Business is conducted through SEACOR Environmental Services Inc. (“SES”) and O’Brien’s Response Management Inc. (“ORM”). SES
includes National Response Corporation, one of the largest providers of oil spill response services in the United States; NRC Environmental
Services Inc., a leading provider of environmental and industrial services on the West Coast of the United States; SEACOR Response Ltd.,
which provides oil spill and emergency response services to customers in various international markets; and certain other subsidiaries
(collectively the “SES Business”). On February 7, 2012, SEACOR announced it had reached an agreement to sell the SES Business to J.F.
Lehman & Company, a leading, middle-market private equity firm. The closing of the transaction is conditioned upon the buyer obtaining
certain debt financing and other customary conditions. Either the Company or the buyer may terminate the stock purchase agreement if the
closing has not occurred by March 31, 2012. The transaction does not include ORM, a leading provider of crisis and emergency preparedness
and response services.
Environmental Services contributed 10%, 33% and 8% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
Products and Services
Environmental Services employs trained personnel and maintains specialized equipment positioned in the United States and in certain
locations outside the United States to respond to oil and chemical spills, other emergencies and customer projects. Environmental Services has
access to a fleet of specialized vessels and barges outfitted with oil spill equipment and aircraft capable of application of chemical dispersants
that are positioned on the East, Gulf and West coasts of the United States as well as in the Caribbean and Hawaii. Oil and chemical spill response
equipment is also stationed in certain international locations in Africa, the Caspian and Black Sea Regions, the Far East and the Middle East.
Environmental Services has established a combined network of approximately 180 independent oil spill response contractors and marine
resource providers that may assist it by providing equipment and personnel.
Environmental Services offers retainer contracts to the maritime community, such as operators of tank and non-tank vessels and chemical
carriers, and to owners of facilities, such as refineries, pipelines, exploration and production platforms, power plants and storage tank and
transportation terminals. Retainer contracts provide customers with access to professional response management and specialized equipment
necessary to respond to an oil or chemical spill emergency and facilitate compliance with regulations such as OPA 90.
Environmental Services provides a range of prevention, environmental compliance, business continuity, crisis communication, software,
media, safety and security consultancy, and training services around the world to assist oil, chemical, industrial, marine transportation, financial
services and government customers in the
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prevention of, and response to, an extensive variety of environmental emergencies on both a retained and stand-alone basis. Environmental
Services assists customers in the selection and training of personnel in the use of environmental equipment and products. In addition,
Environmental Services provides services to state, county and other local government agencies assisting them with preparedness, including
emergency response plans, training and exercises, and response/recovery activities including, claims reimbursement from the federal
government, through agencies such as the Federal Emergency Management Agency (“FEMA”) and the Federal Highway Administration.
Furthermore, it provides oversight of clean-up and debris management required after hurricanes, floods and other natural disasters.
Environmental Services provides industrial and remediation services to oil, chemical, industrial and government clients. These services
include hazardous waste management, standby fire-fighting, industrial and marine cleaning, salvage support, petroleum storage tank cleaning
and removal, and site remediation services.
Markets
The market for contractual oil spill preparedness, response and other related training and consulting services in the United States resulted
from the enactment of OPA 90. OPA 90 and several subsequent regulations promulgated by the Department of Transportation, the
Environmental Protection Agency (“EPA”), the Bureau of Energy Management and the BSEE and the U.S. Coast Guard (“USCG”) require that
all tank vessels operating within the 200-mile Exclusive Economic Zone of the United States and all facilities and pipelines handling oil that
could have a spill affecting the navigable waters of the United States develop plans to respond to a “worst case” oil spill and ensure by contract,
or other approved means, the ability to respond to such a spill.
The market for vessel security assessments, security plans, security training and exercises and other related services is for clients required
to comply with the Maritime Transportation Security Act of 2002. Homeland Security services are marketed to government agencies to assist
with efforts to improve emergency preparedness and response capabilities.
In the international market for oil spill response services, Environmental Services seeks to develop opportunities with governments, other
agencies and international oil and gas exploration and production companies to establish and operate the necessary response capability.
International crisis management and business continuity services focus on middle and senior management and are marketed to a broad range of
industry sectors such as oil and gas, chemical, financial services, transportation and other industries.
The market for government services in the United States includes federal, state, county, city, and other subdivisions and agencies. Services
are typically provided in association with specific funding sources, such as FEMA reimbursement, Homeland Security Grants, municipal
budgets and other agency funding.
Environmental Services offers its services primarily to the domestic and international shipping community, major oil companies,
independent exploration and production companies, pipeline and transportation companies, power generating operators, industrial companies,
airports and state and local government agencies. Services are provided pursuant to contracts generally ranging from one month to ten years. In
2011, no single Environmental Services’ customer was responsible for 10%, or more, of consolidated operating revenues. The ten largest
customers of Environmental Services accounted for approximately 51% of Environmental Services’ operating revenues in 2011. The loss of a
single large client or a group of mid-size customers could have a material adverse effect on Environmental Services’ results of operations.
The principal competitive factors in the environmental service business are price, customer service, reputation, experience, qualifications,
availability of personnel and operating capabilities. In the United States, qualifications include USCG classification as an Oil Spill Removal
Organization (“OSRO”). Environmental
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Services’ NRC is a USCG classified OSRO and it faces competition primarily from the Marine Spill Response Corporation, a non-profit OSRO
funded by the major integrated oil companies. NRC also faces competition from other non-profit industry cooperatives and from those
commercial contractors who target specific market niches in response, consulting and remediation. Internationally, competition for both oil spill
response and emergency preparedness and management comes from a few private companies and regional oil industry cooperatives. Consulting
and training service competitors range from small independent privately owned businesses to large engineering consulting groups and major
defense contractors.
Environmental Services operates worldwide. For the years ended December 31, 2011, 2010 and 2009, 12%, 3% and 14%, respectively, of
Environmental Services’ operating revenues were derived from its foreign operations.
Foreign operations are subject to inherent risks, which, if they materialize could have a material adverse effect on Environmental Services’
financial condition and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in “Item 1A.
Risk Factors.”
Business
Commodity Trading and Logistics operates an integrated business involved in the purchase, storage, transportation and sale of energy and
agricultural commodities. The principal commodities currently involved are sugar, ethanol, clean blendstocks and crude oil. Commodity Trading
and Logistics contributed 45%, 28% and 28% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
Products and Services
Energy. The energy group is primarily focused on the domestic merchandising and transportation of physical ethanol, clean blendstocks,
heavy naphtha and crude oil. The energy group also operates, through an investment in a joint venture, a food and fuel grade processing plant
which produces beverage and industrial alcohol and fuel-grade ethanol. The output of the plant is sold primarily to the energy group and its joint
venture partner.
Agricultural. The agricultural group is primarily focused on the global origination, trading and merchandising of sugar, rice and industrial
salt. The group’s involvement in these commodities pairs producers and buyers and arranges for the transportation and logistics of the product.
Commodity Trading and Logistics uses a variety of transportation modes to transport its products, including trucks, railcars, river barges,
pipelines and ocean going vessels, which are generally leased. Commodity Trading and Logistics leverages the asset base of SEACOR’s other
business units, primarily Inland River Services, including its tank farm and handling facility in Sauget, Illinois, for the transportation and storage
of product.
Markets
Commodity Trading and Logistics’ activities are global and dependent upon factors that Commodity Trading and Logistics cannot control,
including macro and micro economic supply and demand factors, governmental intervention or mandates, weather patterns, and the price and
availability of substitute products. Commodity Trading and Logistics produces, purchases, markets and sells ethanol to customers for blending
into the U.S. gasoline pool and transports clean blendstocks for export. Commodity Trading and Logistics purchases and resells crude oil
primarily of Canadian origin to customers in the United States and delivers the material via pipeline and barge. With respect to sugar,
Commodity Trading and Logistics’ primary markets include countries in South America, Africa, the Caribbean and the Far East.
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Ethanol demand is subject to overall gasoline demand and gasoline blending economics; governmental policies and mandates; the cost of
production of feedstock commodities such as corn; gasoline and oil prices and freight and handling costs. The demand for the clean blendstocks
depends primarily on oil and natural gas liquids prices.
The availability of agricultural commodities is affected by weather, plant diseases, governmental policies and agricultural growing
patterns. Sugar demand is affected by worldwide consumption of food products, soft drinks and sweetened beverages, and by population growth,
changes in per capita income and the relative prices of substitute sweeteners. It is also impacted by other macro-economic factors including the
volatility of foreign currency markets.
Commodity Trading and Logistics sells ethanol, crude oil and blendstocks primarily to end users (gasoline refiners, blenders, and their
suppliers) and other market participants and may also purchase, sell, or exchange product with other market participants to optimize logistics or
hedge market exposure. The principal purchasers of Commodity Trading and Logistics’ sugar are private importers and distributors.
In 2011, one customer (Motiva Enterprises LLC) of Commodity Trading and Logistics was responsible for 10% or more of consolidated
operating revenues. The ten largest customers of Commodity Trading and Logistics accounted for approximately 76% of Commodity Trading
and Logistics’ operating revenues in 2011. The loss of one or a few of these customers could have a material adverse effect on Commodity
Trading and Logistics’ results of operations.
The commodity trading and logistics business is highly competitive. Major competitors for the energy group include other marketers,
traders and other product suppliers. Major competitors for the agricultural group include large agribusiness, major and independent trading
houses and regional or local grower cooperatives.
Risk of Foreign Operations
For the year ended December 31, 2011, 2010 and 2009, 25%, 21% and 38%, respectively, of Commodity Trading and Logistics operating
revenues were derived from foreign operations.
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on Commodity Trading and
Logistics’ financial condition and its results of operations. See the risk factor regarding “Risks from the Company’s International Operations” in
Other
Harbor and Offshore Towing Services. As of December 31, 2011, Harbor and Offshore Towing Services operated a total of five ocean
liquid tank barges and 28 vessels, of which 13 were conventional tugs, five were Azimuth Stern Drive tugs, three were Forward Azimuth Drive
tugs, two were tractor tugs and five were Ship Docking Modules (“SDM™”). SDMs™ are innovative vessels designed and patented by the
Company that are maneuverable, efficient and flexible and require fewer crew members than conventional harbor tugs. The tugs were operating
in various ports including four in Port Everglades, Florida, four in the Port of Tampa, Florida, one in Port Canaveral, Florida, seven in Port
Arthur, Texas, four in Port Mobile, Alabama, three in Lake Charles, Louisiana. In addition, four tugs and five ocean liquid tank barges were
operating in St. Eustatius and one tug was operating under a bareboat charter arrangement.
As of December 31, 2011, in addition to its existing fleet, Harbor and Offshore Towing Services had a new construction project in progress
for two U.S.-flag Azimuth Stern Drive harbor tugs scheduled for delivery in the first quarter of 2013.
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In 2011, no single customer of Harbor and Offshore Towing Services was responsible for 10% or more of consolidated operating revenues.
The ten largest customers of Harbor and Offshore Towing Services accounted for approximately 51% of Harbor and Offshore Towing Services’
operating revenues in 2011. The loss of one or a few of these customers could have a material adverse effect on Harbor and Offshore Towing
Services’ results of operations.
Other Joint Ventures, Leasing and Other Activities. The Company has noncontrolled equity investments in various entities including a
company that designs and manufactures water treatment systems for sale or lease and industrial aviation service businesses in Asia. The
Company also engages in lending and leasing activities.
Government Regulation
Regulatory Matters
The Company’s operations are subject to significant United States federal, state and local regulations, as well as international conventions
and the laws of foreign jurisdictions where the Company operates its equipment or where the equipment is registered. The Company’s
domestically registered vessels are subject to the jurisdiction of the USCG, the National Transportation Safety Board (“NTSB”), the U.S.
Customs and Border Protection and the U.S. Maritime Administration, as well as to the rules of private industry organizations such as the
American Bureau of Shipping. These agencies and organizations establish safety standards and are authorized to investigate vessels and
accidents and to recommend improved maritime safety standards. Aviation Services is subject to regulations pursuant to the Federal Aviation
Act of 1958, as amended (“Federal Aviation Act”), and other statutes pursuant to Federal Aviation Regulations Part 135 Air Taxi Certificate
granted by the FAA. The FAA regulates flight operations and, in this respect, has jurisdiction over Aviation Services’ personnel, aircraft, ground
facilities and certain technical aspects of its operations. In addition to the FAA, the NTSB is authorized to investigate aircraft accidents and to
recommend improved safety standards. The Company is also subject to the Communications Act of 1934, as amended, because of the use of
radio facilities in Aviation Services’ operations.
Offshore Marine Services, Marine Transportation Services and Inland River Services are subject to the U.S. cabotage laws that impose
certain restrictions on the ownership and operation of vessels in the U.S. coastwise trade (i.e., trade between points in the United States),
including cargo. These laws are principally contained in 46 U.S.C. § 50501 and 46 U.S.C. Chapter 551 and related regulations and are
commonly referred to collectively as the “Jones Act.” Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S.
coastwise trade be built in the United States, registered under the U.S. flag, manned by predominantly U.S. crews, and owned and operated by
U.S. citizens within the meaning of the Jones Act. For purposes of the Jones Act, a corporation, for example, must satisfy the following
requirement to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the United States or of a state, territory or
possession thereof; (ii) each of the chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen;
(iii) no more than a minority of the number of directors of such corporation necessary to constitute a quorum for the transaction of business can
be non-U.S. citizens; and (iv) at least 75% of each class or series of stock in such corporation must be owned by U.S. citizens within the meaning
of the Jones Act. Should the Company fail to comply with the U.S. citizenship requirements of the Jones Act, it would be prohibited from
operating its vessels in the U.S. coastwise trade during the period of such non-compliance. In addition, the Company could be subject to fines
and its vessels could be subject to seizure and forfeiture for violations of the Jones Act and the related U.S. vessel documentation laws.
To facilitate compliance with the Jones Act, SEACOR’s Restated Certificate of Incorporation: (i) limits the aggregate percentage
ownership by non-U.S. citizens of any class of SEACOR’s capital stock (including Common Stock) to 22.5% of the outstanding shares of each
such class to ensure that such foreign ownership will not exceed the maximum percentage permitted by applicable maritime law (presently 25%)
but authorizes SEACOR’s Board of Directors, under certain circumstances, to increase the foregoing percentage to 24%; (ii) requires institution
of a dual stock certification system to help determine such ownership; (iii) provides that any issuance or transfer of shares in excess of such
permitted percentage shall be ineffective as against the
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Company and that neither the Company nor its transfer agent shall register such purported issuance or transfer of shares or be required to
recognize the purported transferee or owner as a stockholder of the Company for any purpose whatsoever except to exercise the Company’s
remedies; (iv) provides that any such excess shares shall not have any voting or dividend rights; (v) permits the Company to redeem any such
excess shares; and (vi) permits the Board of Directors to make such determinations as reasonably may be necessary to ascertain such ownership
and implement such limitations. In addition, SEACOR’s by-laws provide that the number of non-U.S. citizen directors shall not exceed a
minority of the number necessary to constitute a quorum for the transaction of business and restrict any non-U.S. citizen officer from acting in
the absence or disability of the Chairman of the Board of Directors, the Chief Executive Officer or the President.
Aviation Services’ helicopters operating in the United States are subject to registration and citizenship requirements under the Federal
Aviation Act. This Act requires that before an aircraft may be legally operated in the United States, it must be owned by “citizens of the United
States,” which, in the case of a corporation, means a corporation: (i) organized under the laws of the United States or of a state, territory or
possession thereof; (ii) of which at least 75% of its voting interests are owned or controlled by persons who are U.S. “citizens” (as defined in the
Federal Aviation Act and regulations promulgated thereunder); and (iii) of which the president and at least two-thirds of the board of directors
and managing officers are U.S. citizens.
Marine Transportation Services, Inland River Services, Harbor and Offshore Towing Services and Offshore Marine Services operate
vessels that are registered in the United States. Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing
Services, and an Inland River Services’ joint venture operate vessels registered in a number of foreign jurisdictions. Vessels registered in these
jurisdictions are subject to the laws of the applicable jurisdiction as to ownership, registration, manning and safety. In addition, the vessels are
subject to the requirements of a number of international conventions that are applicable to vessels depending on their jurisdiction of registration.
Among the more significant of these conventions are: (i) the 1978 Protocol Relating to the International Convention for the Prevention of
Pollution from Ships; (ii) the International Convention on the Safety of Life at Sea, 1974 and 1978 Protocols; and (iii) the International
Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”). Major revisions to STCW and its associated
Code entered into force on January 1, 2012 with a five-year transitional period until January 1, 2017. The Company believes that its vessels
registered in foreign jurisdictions are in compliance with all applicable material regulations and have all licenses necessary to conduct their
business. In addition, vessels operated as standby safety vessels in the North Sea are subject to the requirements of the Department of Transport
of the United Kingdom pursuant to the United Kingdom Safety Act.
All of Marine Transportation Services’, Harbor and Offshore Towing Services’, certain of Offshore Marine Services’ vessels and all of
Inland River Services’ liquid tank barges are subject to periodic inspection and survey by, and drydocking and maintenance requirements of, the
USCG and/or the American Bureau of Shipping and other marine classification societies. Moreover, to ensure compliance with applicable safety
regulations, the USCG is authorized to inspect vessels at will.
NRC is classified by the USCG as an Oil Spill Removal Organization (“OSRO”) for every port in the continental United States, Hawaii
and the Caribbean. The OSRO classification process is strictly voluntary. However, under the Oil Pollution Act of 1990 (“OPA 90”) owners and
operators of tank vessels and certain oil facilities (responsible parties) are required to prepare response plans and have contracts for the resources
necessary to respond to threats of oil spills and oil spills up to a worst case scenario. As a result, classified response contractors are the primary
means by which responsible parties meet their OPA 90 obligation to ensure the availability of adequate resources and personnel to respond to
and recover oil spills of various types and sizes in different operating environments and geographic locations.
In addition to the USCG, the EPA, the Office of Pipeline Safety, BSEE and certain individual states regulate vessels, facilities and
pipelines in accordance with the requirements of OPA 90 or under analogous state law. There is currently little uniformity among the regulations
issued by these agencies.
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When responding to third-party oil spills, Environmental Services enjoys immunity from liability under federal law and some state laws for
any spills arising from its response efforts, except in the event of death or personal injury or as a result of its gross negligence or willful
misconduct. It should be noted, however, that as a result of the Deepwater Horizon incident in 2010, some gaps have been identified in this
responder immunity regime and actions are being taken by the response industry to seek modifications to existing law to remedy these gaps.
Environmental Compliance
As more fully described below, all of the Company’s businesses are, to some degree, subject to federal, state, local and international laws
and regulations relating to environmental protection and occupational safety and health, including laws that govern the discharge of oil and
pollutants into navigable waters. Violations of these laws may result in civil and criminal penalties, fines, injunctions or other sanctions.
The Company believes that its operations are currently in compliance with all material environmental laws and regulations. It does not
expect that it will be required to make capital expenditures in the near future that are material to its financial position or operations to comply
with environmental laws and regulations; however, because such laws and regulations are frequently changing and may impose increasingly
strict requirements, the Company cannot predict the ultimate cost of complying with these laws and regulations. The recent trend in
environmental legislation and regulation is generally toward stricter standards, and it is the Company’s view that this trend is likely to continue.
OPA 90 establishes a regulatory and liability regime for the protection of the environment from oil spills. OPA 90 applies to owners and
operators of facilities operating near navigable waters and owners and operators of vessels operating in U.S. waters, which include the navigable
waters of the United States and the 200-mile Exclusive Economic Zone of the United States. For purposes of its liability limits and financial
responsibility and response planning requirements, OPA 90 differentiates between tank vessels (which include the Company’s chemical and
petroleum product vessels and liquid tank barges) and “other vessels” (which include the Company’s tugs, offshore support vessels and dry
cargo barges).
Under OPA 90, owners and operators of regulated facilities and owners and operators or bareboat charterers of vessels are “responsible
parties” and are jointly, severally and strictly liable for removal costs and damages arising from facility and vessel oil spills or threatened spills
up to their limits of liability (unless the limits are broken as discussed below) unless the spill results solely from the act or omission of certain
third parties under specified circumstances, an act of God or an act of war. In addition, Section 713 of the Coast Guard Authorization Act of
2010, enacted on October 15, 2010, amended OPA 90 to include as a responsible party the owner of oil being transported in a tank vessel with a
single hull after December 31, 2010. Damages are defined broadly to include: (i) injury to natural resources and the costs of remediation thereof;
(ii) injury to, or economic losses resulting from the destruction of, real and personal property; (iii) net loss by the United States government, a
state or political subdivision thereof, of taxes, royalties, rents, fees and profits; (iv) lost profits or impairment of earning capacity due to property
or natural resources damage; (v) net costs of providing increased or additional public services necessitated by a spill response, such as protection
from fire, safety or other hazards; and (vi) loss of subsistence use of available natural resources.
Effective July 31, 2009, the OPA regulations were amended to increase the liability limits for responsible parties for non-tank vessels to
$1,000 per gross ton or $854,400, whichever is greater and for tank vessels the maximum limits of liability are the greater of $3,200 per gross
ton or $23,496,000. These liability limits do not apply (a) if an incident is caused by the responsible party’s violation of federal safety,
construction or operating regulations or by the responsible party’s gross negligence or willful misconduct, (b) if the responsible party fails to
report the incident or to provide reasonable cooperation and assistance in connection with oil removal activities as required by a responsible
official or (c) if the responsible party fails to comply with an order issued under OPA 90.
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Under OPA 90, with certain limited exceptions, all newly-built oil tankers carrying crude oil and petroleum products in U.S. waters must
have double-hulls. Existing single-hull, double-side or double-bottom tank vessels, unless retrofitted with double-hulls, must be phased out of
service by January 1, 2015, depending upon the vessel’s size, age and place of discharge.
OPA 90 expanded pre-existing financial responsibility requirements and requires tank vessel owners and operators to establish and
maintain with the USCG evidence of insurance or qualification as a self-insurer or other evidence of financial responsibility sufficient to meet
their potential liabilities under OPA 90. Under OPA, an owner or operator of a fleet of vessels may demonstrate evidence of financial
responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA. The Company has
satisfied USCG regulations by providing evidence of financial responsibility demonstrated by commercial insurance and self-insurance. The
regulations also implement the financial responsibility requirements of the Comprehensive Environmental Response, Compensation and
Liability Act (“CERCLA”), which imposes liability for discharges of hazardous substances such as chemicals, similar to OPA, and provides
compensation for cleanup, removal and natural resource damages. Liability per vessel under CERCLA is limited to the greater of $300 per gross
ton or $5 million, unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations, in which case
liability is unlimited.
As a result of the Delaware River Protection Act, which was enacted by Congress in 2006, the OPA limits of liability must be adjusted not
less than every three years to reflect significant increases in the Consumer Price Index.
OPA 90 amended the Clean Water Act (“CWA”), described below, to require the owner or operator of certain facilities or of a tank vessel
to prepare facility or vessel response plans and to contract with oil spill removal organizations to remove, to the maximum extent practicable, a
worst-case discharge. The Company has complied with these requirements. The Company expects its pollution liability insurance to cover any
cost of spill removal subject to overall coverage limitations of $1.0 billion; however, a failure or refusal of the insurance carrier to provide
coverage in the event of a catastrophic spill could result in material liability in excess of available insurance coverage, resulting in a material
adverse effect on the Company’s business, financial position or its results of operations.
OPA 90 allows states to impose their own liability regimes with respect to oil pollution incidents occurring within their boundaries and
many states have enacted legislation providing for unlimited liability for oil spills. Some states have issued regulations addressing financial
responsibility and vessel and facility response planning requirements. The Company does not anticipate that state legislation or regulations will
have any material impact on its operations.
In 2011, Congress failed to enact any notable oil pollution legislation. However, it is expected that Congress will take up and introduce
new spill legislation in 2012 as a result of lessons learned from the Deepwater Horizon incident in 2010 now that all of the significant
investigation reports were completed in 2011. If Congress passes spill legislation in 2012, the Company could be subject to greater potential
liability or penalties if any of the Company’s vessels has an incident or the Company could be required to comply with other requirements
thereby increasing the Company’s operating costs.
In addition to OPA 90, the following are examples of environmental laws that relate to the Company’s business and operations:
The International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto
(“MARPOL”), is the main international convention covering prevention of pollution of the marine environment by vessels from operational or
accidental causes. It has been updated by amendments through the years and is implemented in the United States pursuant to the Act to Prevent
Pollution from Ships. MARPOL has six specific annexes and Annex I governs oil pollution.
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Since the 1990s, the DOJ has been aggressively enforcing U.S. criminal laws against vessel owners, operators, managers, crewmembers,
shoreside personnel, and corporate officers for actions related to violations of Annex I. Prosecutions generally involve violations related to
pollution prevention devices, such as the oil-water separator, and include falsifying the Oil Record Book, obstruction of justice, false statements
and conspiracy. Over the past ten years, the DOJ has imposed significant criminal penalties in vessel pollution cases and the vast majority of
such cases did not actually involve pollution in the United States, but rather efforts to conceal or cover up pollution that occurred elsewhere. In
certain cases, responsible shipboard officers and shoreside officials have been sentenced to prison. In addition, the DOJ has required defendants
to implement a comprehensive environmental compliance plan (“ECP”). If the Company is subjected to a DOJ criminal prosecution, it could
face significant criminal penalties and defense costs as well as costs associated with the implementation of an ECP.
The CWA, enacted in 1972, prohibits the discharge of “pollutants,” which includes oil or hazardous substances, into navigable waters of
the United States and imposes civil and criminal penalties for unauthorized discharges. The CWA complements the remedies available under
OPA and CERCLA.
The CWA also established the National Pollutant Discharge Elimination System (“NPDES”) permitting program, which governs
discharges of pollutants into navigable waters of the United States. Pursuant to the NPDES, EPA issued a Vessel General Permit (“VGP”),
which has been in effect since February 6, 2009, covering 26 types of discharges incidental to normal vessel operations. The VGP applies to U.S.
and foreign-flag commercial vessels that are at least 79 feet in length, and therefore applies to the Company’s vessels.
The VGP requires vessel owners and operators to adhere to “best management practices” to manage the 26 listed discharge streams,
including ballast water, that occur normally in the operation of a vessel. Vessel owners and operators must implement various training,
inspection, monitoring, recordkeeping, and reporting requirements, as well as corrective actions upon identification of each deficiency. Several
states have specified significant, additional requirements in connection with state mandated CWA certifications relating to the VGP.
On February 11, 2011, the EPA and the Coast Guard entered into a Memorandum of Understanding (“MOU”) outlining the steps the
agencies will take to better coordinate efforts to implement and enforce the VGP. Under the MOU, the Coast Guard will identify and report to
EPA detected VGP deficiencies as a result of its normal boarding protocols for U.S.-flag and foreign-flag vessels. However, EPA retains
responsibility and enforcement authority to address VGP violations. The Company has filed a Notice of Intent to be covered by the VGP for
each of the Company’s ships. Failure to comply with the VGP may result in civil or criminal penalties. The current VGP expires on
December 19, 2013. EPA published on December 8, 2011, a draft Vessel General Permit for public comment which will replace the current
VGP. The 2013 replacement VGP could result in increased requirements that could result in increasing the Company’s operating costs.
The United States National Invasive Species Act (“NISA”) was enacted in 1996 in response to growing reports of harmful organisms being
released into United States waters through ballast water taken on by vessels in foreign ports. The Coast Guard adopted regulations under NISA
in July 2004 that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering United States
waters. These requirements can be met by performing mid-ocean ballast exchange, by retaining ballast water onboard the vessel, or by using
environmentally sound ballast water treatment methods approved by the Coast Guard. Mid-ocean ballast exchange is the primary method for
compliance with the Coast Guard regulations; alternative methods for ballast water treatment are still under development. Vessels that are unable
to conduct mid-ocean ballast exchange due to voyage or safety concerns may discharge minimum amounts of ballast water, provided that they
comply with recordkeeping requirements and document the reasons they could not follow the required ballast water management requirements.
On August 28, 2009, the Coast Guard proposed to amend its regulations on ballast water management by establishing standards for the allowable
concentration of living organisms in a vessel’s ballast water discharged in United States waters. As proposed, it would establish a two tier
standard. Tier one would set the initial limits to match those set internationally by IMO in the Ballast Water Convention, which
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has not yet entered into force. The interim final rule to implement this proposal was sent to the Office of Management and Budget for review on
November 11, 2011. Final regulations are expected to be published in the first quarter of 2012. A limited number of technologies have been
approved and may enable some vessels to meet these discharge standards. The tier two standard would be more stringent and cannot be met
using existing treatment technology. This second tier, as proposed, would come into effect on January 1, 2017. The interim final rule to
implement this proposal was sent to the Office of Management and Budget for review on November 11, 2011. Final regulations are expected to
be published in the first quarter of 2012 with an effective date in 2012. When the IMO Ballast Water Convention comes into force, certain of the
Company’s vessels may be required to have a ballast water treatment system on board.
Both houses of Congress have proposed a number of bills to amend NISA but it cannot be predicted which bill, if any, will be enacted into
law.
In the absence of stringent federal standards, states have enacted legislation or regulations to address invasive species through ballast water
and hull cleaning management, and permitting requirements, which in many cases have also become part of the state’s VGP certification. For
instance, California requires vessels to comply with state ballast water discharge and hull fouling requirements. Oceangoing vessels covered by
the VGP are prohibited from discharging ballast water in Michigan waters unless the vessel meets Michigan state requirements and obtains a
Michigan permit. New York requires vessels to meet ballast water treatment standards by January 1, 2012 with technology that is not available
today, but has granted extensions to this deadline until August 1, 2013. Other states may proceed with the enactment of similar requirements that
could increase the costs of operating in state waters.
The United States Clean Air Act (as amended by the Clean Air Act Amendments of 1977 and 1990, the “CAA”) was enacted in 1970 and
required the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA also
requires states to submit State Implementation Plans (“SIPs”), which are designed to attain national health-based air quality standards throughout
the United States, including major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and
unloading operations by requiring the installation of vapor control equipment. The EPA and some states have each proposed more stringent
regulations of air emissions from propulsion and auxiliary engineers on oceangoing vessels. For example, the California Air Resources Board of
the state of California (“CARB”) has published regulations requiring oceangoing vessels visiting California ports to reduce air pollution through
the use of marine distillate fuels once they sail within 24 miles of the California coastline effective July 1, 2009. CARB expanded the boundaries
of where these requirements apply and began enforcing these new requirements on December 1, 2011. More stringent fuel oil requirements for
marine gas oil are scheduled to go into effect on August 1, 2012.
The state of California also began on January 1, 2010, implementing regulations on a phased in basis that require vessels to either shut
down their auxiliary engines while in port in California and use electrical power supplied at the dock or implement alternative means to
significantly reduce emissions from the vessel’s electric power generating equipment while it is in port. Generally, a vessel will run its auxiliary
engines while in port in order to power lighting, ventilation, pumps, communication and other onboard equipment. The emissions from running
auxiliary engines while in port may contribute to particulate matter in the ambient air. The purpose of the regulations is to reduce the emissions
from a vessel while it is in port. The cost of reducing vessel emissions while in port may be substantial if the Company determines that it cannot
use or the ports will not permit the Company to use electrical power supplied at the dock. Alternatively, the ports may pass the cost of supplying
electrical power at the port to us, and The Company may incur additional costs in connection with modifying the Company’s vessels to use
electrical power supplied at the dock.
Annex VI of MARPOL, addressing air emissions from vessels, came into force in the United States on January 8, 2009 and requires the
use of low sulfur fuels worldwide in both auxiliary and main propulsion diesel engines on vessels. By July 1, 2010, amendments to MARPOL
required all diesel engines on vessels built
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between 1990 and 2000 to meet a Nitrous Oxide (“NOx”) standard of 17.0g-NOx/kW-hr. On January 1, 2011 the NOx standard was lowered to
14.4 g-NOx/kW-hr and on January 1, 2016 it will be further lowered to 3.4 g-NOx/kW-hr, for vessels operating in a designated Emission
Control Area (“ECA”).
In addition, the current global sulfur cap of 4.5% sulfur was reduced to 3.5% effective January 1, 2012 and will be further reduced to as
low as 0.5% sulfur in 2020. The recommendations made in connection with a MARPOL fuel availability study scheduled for 2018 at IMO may
cause this date to slip to 2025. The current 1.0% maximum sulfur emissions permitted in designated ECAs around the world will be reduced to
0.1% sulfur on January 1, 2015. These sulfur limitations will be applied to all subsequently approved ECAs.
In addition, the EPA received approval of the IMO, in coordination with Environment Canada, to designate all waters, with certain limited
exceptions, within 200 nautical miles of Hawaii and the U.S. and Canadian coasts as ECAs. The North American ECA will go into force on
August 1, 2012 limiting the sulfur content in fuel that is burned as described above. Beginning in 2016, NOx after-treatment requirements
become applicable in this ECA as well. Furthermore, on July 15, 2011, the IMO officially adopted amendments to MARPOL to designate certain
waters around Puerto Rico and the U.S. Virgin Islands as the United States – Caribbean ECA, where stringent international emission standards
will also apply to ships. For this area, the effective date of the first-phase fuel sulfur standard is January 2014, and the second phase begins in
2015. Stringent NOx engine standards begin in 2016.
With the adoption of the North American ECA, ships operating within 200 miles of the U.S. coast will be required to burn 1% sulfur
content fuel oil as of August 1, 2012 (when the ECA goes into effect) and 0.1% sulfur content fuel oil as of January 1, 2015. The Company has
one U.S.-flag product tanker that cannot safely burn 0.1% fuel oil without minor modification to its fuel system. EPA has received approval at
IMO to exempt and has exempted steamships from the 0.1% sulfur content fuel oil requirement until 2020.
The Company’s operations occasionally generate and require the transportation, treatment and disposal of both hazardous and nonhazardous solid wastes that are subject to the requirements of the United States Resource Conservation and Recovery Act (“RCRA”) or
comparable state, local or foreign requirements. From time to time the Company arranges for the disposal of hazardous waste or hazardous
substances at offsite disposal facilities. With respect to the Company’s marine operations, EPA has a longstanding policy that RCRA only
applies after wastes are “purposely removed” from the vessel. As a general matter, with certain exceptions, vessel owners and operators are
required to determine if their wastes are hazardous, obtain a generator identification number, comply with certain standards for the proper
management of hazardous wastes, and use hazardous waste manifests for shipments to disposal facilities. The degree of RCRA regulation will
depend on the amount of hazardous waste a generator generates in any given month. Moreover, vessel owners and operators may be subject to
more stringent state hazardous waste requirements in those states where they land hazardous wastes. If such materials are improperly disposed of
by third parties that the Company contracts with, the Company may still be held liable for cleanup costs under applicable laws.
The Endangered Species Act, federal conservation regulations and comparable state laws protect species threatened with possible
extinction. Protection of endangered and threatened species may include restrictions on the speed of vessels in certain ocean waters and may
require the Company to change the routes of the Company’s vessels during particular periods. For example, in an effort to prevent the collision
of vessels with the North Atlantic right whale, federal regulations restrict the speed of vessels to ten knots or less in certain areas along the
Atlantic Coast of the United States during certain times of the year. The reduced speed and special routing along the Atlantic Coast results in the
use of additional fuel, which affects the Company’s results of operations.
With regard to greenhouse gas regulation, in February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate
Change (the “Kyoto Protocol”) entered into force. Pursuant to the Kyoto Protocol, countries that are parties to the Convention are required to
implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing
to
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global warming. In October 2007, the California Attorney General and a coalition of environmental groups petitioned the EPA to regulate
greenhouse gas emissions from oceangoing vessels under the CAA. Any passage of climate control legislation or other regulatory initiatives in
the United States that restrict emissions of greenhouse gases could entail financial impacts on the Company’s operations that cannot be predicted
with certainty at this time. The issue is being heavily debated within various international regulatory bodies, such as the IMO, and climate
control measures that effect shipping could also be implemented on an international basis potentially affecting the Company’s vessel operations.
The Company manages exposure to losses from the above-described laws through its efforts to use only well-maintained, well-managed
and well-equipped facilities and vessels and its development of safety and environmental programs, including a maritime compliance program
and its insurance program. The Company believes it will be able to accommodate reasonably foreseeable environmental regulatory changes
subject to the comments above. There can be no assurance, however, that any future regulations or requirements or that any discharge or
emission of pollutants by the Company will not have a material adverse effect on the Company’s business, financial position or its results of
operations.
Security
Heightened awareness of security needs brought about by the events of September 11, 2001 has caused the USCG, the IMO, states and
local ports to adopt heightened security procedures relating to ports and vessels.
Specifically, on November 25, 2002, the Maritime Transportation Security Act of 2002 (“MTSA”) was signed into law. To implement
certain portions of MTSA, in July 2003, the Coast Guard issued regulations requiring the implementation of certain security requirements aboard
vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, the IMO adopted amendments to the
International Convention for the Safety of Life at Sea (“SOLAS”), known as the International Ship and Port Facilities Security Code (the “ISPS
Code”), creating a new chapter dealing specifically with maritime security. The new chapter came into effect in July 2004 and imposes various
detailed security obligations on vessels and port authorities. Among the various requirements under MTSA and/or the ISPS Code are:
•
onboard installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;
•
onboard installation of ship security alert systems;
•
the development of vessel and facility security plans;
•
the implementation of a Transportation Worker Identification Credential program; and
•
compliance with flag state security certification requirements.
The Coast Guard regulations, intended to align with international maritime security standards, generally deem foreign-flag vessels to be in
compliance with MTSA vessel security measures provided such vessels have onboard a valid International Ship Security Certificate that attests
to the vessel’s compliance with SOLAS security requirements and the ISPS Code. U.S.-flag vessels, however, must comply with all of the
security measures required by MTSA, as well as SOLAS and the ISPS Code if engaged in international trade.
We believe that the Company has implemented the various security measures required by the MTSA, SOLAS and the ISPS Code in light
of the new requirements. Specifically, the Company has implemented security plans and procedures for each of its U.S.-flag vessels and its
terminal operation in Sauget, Illinois pursuant to rules implementing the MTSA that have been issued by the USCG. The Company’s U.S.-flag
vessels subject to the requirements of ISPS, all foreign-flag vessels, and U.S.-flag vessels operating on international voyages were all in
compliance with ISPS requirements effective July 1, 2004.
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Industry Hazards and Insurance
Vessel operations involve inherent risks associated with carrying large volumes of cargo and rendering services in a marine environment.
In addition, helicopter operations are potentially hazardous and may result in incidents or accidents. Hazards include adverse weather conditions,
collisions, fire and mechanical failures, which may result in death or injury to personnel, damage to equipment, loss of operating revenues,
contamination of cargo, pollution and other environmental damages and increased costs. The Company maintains marine and aviation hull,
liability and war risk, general liability, workers compensation and other insurance customary in the industries in which the Company operates.
The Company also conducts training and safety programs to promote a safe working environment and minimize hazards.
Employees
As of December 31, 2011, the Company employed 6,043 individuals directly and indirectly through crewing or manning agreements.
Substantially all indirect employees support Offshore Marine Services’ vessel operations.
As of December 31, 2011, Offshore Marine Services employed 764 seafarers in the North Sea, some of whom were members of a union
under the terms of an ongoing agreement. In the United States, a total of 269 employees in Marine Transportation Services and Harbor and
Offshore Towing Services are unionized under agreements that expire at varying times through August 31, 2013. Certain individuals in
Environmental Services are also represented by unions.
Management considers relations with its employees to be satisfactory.
ITEM 1A.
RISK FACTORS
Risks, Uncertainties and Other Factors That May Affect Future Results
The Company’s results of operations, financial condition and cash flow may be adversely affected by numerous risks. Carefully consider
the risks described below, which represent some of the more critical risk factors that affect the Company, as well as the other information that
has been provided in this Annual Report on Form 10-K. The risks described below include all known material risks faced by the Company.
Additional risks not presently known may also impair the Company’s business operations.
Difficult economic conditions could materially adversely affect the Company. The success of the Company’s business is both directly and
indirectly dependent upon conditions in the global financial markets and economic conditions throughout the world that are outside its control
and difficult to predict. Continued uncertainty about global economic conditions may lead businesses to postpone spending in response to tighter
credit and reductions in income or asset values, which may lead many lenders and institutional investors to reduce, and in some cases, cease to
provide funding to borrowers. These factors may also adversely affect the Company’s liquidity and financial condition (including the failure of
lenders participating in the Company’s credit facility to fulfill their commitments and obligations), and the liquidity and financial condition of
the Company’s customers. Tight credit conditions could limit the Company’s ability to secure additional financing, if required, due to difficulties
accessing the capital markets. Factors such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws
(including laws relating to taxation), trade barriers, commodity prices, currency exchange rates and controls, and national and international
political circumstances (including wars, terrorist acts or security operations) can have a material negative impact on the Company’s business and
investments, which could reduce its revenues and profitability. Although the Company has some ongoing exposure to credit risks on its accounts
receivable balances, these risks are heightened during periods when economic conditions worsen. The Company has procedures that are
designed to monitor and limit exposure to credit risk on its receivables; however, there can be no assurance that such procedures will effectively
limit its credit risk and avoid losses that could have a material adverse effect on the Company’s financial position and its results of operations.
Unstable economic conditions may also increase the volatility of the Company’s stock price.
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There are risks associated with the Company’s debt structure. The Company’s ability to meet its debt service obligations is dependent
upon its future operating results, which are subject to general economic conditions, industry cycles and financial, business and other factors,
many of which are beyond its control. The Company’s debt levels and the terms of its indebtedness may limit its liquidity and flexibility in
obtaining additional financing and pursuing other business opportunities. In addition, the Company’s overall debt level and/or market conditions
could lead the credit rating agencies to lower the Company’s corporate credit ratings, which could limit its ability to issue additional debt in
amounts and/or on terms that it considers reasonable.
Demand for many of the Company’s services is impacted by the level of activity in the offshore oil and natural gas exploration,
development and production industry. The level of offshore oil and natural gas exploration, development and production activity has
historically been volatile and that volatility is likely to continue. The level of activity is subject to large fluctuations in response to relatively
minor changes in a variety of factors that are beyond the Company’s control, including:
•
general economic conditions;
•
prevailing oil and natural gas prices and expectations about future prices and price volatility;
•
assessments of offshore drilling prospects compared with land-based opportunities;
•
the cost of exploring for, producing and delivering oil and natural gas offshore;
•
worldwide demand for energy, other petroleum products and chemical products;
•
availability and rate of discovery of new oil and natural gas reserves in offshore areas;
•
federal, state, local and international political and economic conditions, and policies including cabotage and local content laws;
•
technological advances affecting exploration, development, energy production and consumption;
•
weather conditions;
•
environmental regulation;
•
regulation of drilling activities and the availability of drilling permits and concessions; and
•
the ability of oil and natural gas companies to generate or otherwise obtain funds for capital projects.
A prolonged material downturn in oil and natural gas prices is likely to cause a substantial decline in expenditures for exploration,
development and production activity, which would result in a decline in demand and lower rates for the Company’s offshore energy support
services and tanker services. Moreover, for the year ended December 31, 2011, approximately 31% of Offshore Marine Services’ and 46% of
Aviation Services’ operating revenues were earned in the U.S. Gulf of Mexico and are therefore dependent on levels of activity in that region,
which may differ from levels of activity in other regions of the world.
Failure to maintain an acceptable safety record may have an adverse impact on the Company’s ability to retain customers. The
Company’s customers consider safety and reliability a primary concern in selecting a service provider. The Company must maintain a record of
safety and reliability that is acceptable to its customers. Should this not be achieved, the ability to retain current customers and attract new
customers may be adversely affected.
Adverse results of legal proceedings could materially adversely affect the Company. The Company is subject to and may in the future be
subject to a variety of legal proceedings and claims that arise out of the ordinary conduct of its business. Results of legal proceedings cannot be
predicted with certainty. Irrespective of its merits, litigation may be both lengthy and disruptive to the Company’s operations and may cause
significant expenditure and diversion of management attention. The Company may be faced with significant monetary damages or injunctive
relief against it that could materially adversely affect a portion of its business operations or materially and adversely affect the Company’s
financial position and its results of operations should the Company fail to prevail in certain matters.
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The Company may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely
affect the Company’s financial condition and its results of operations, and may result in additional risks to its businesses. The Company
continuously evaluates the acquisition of operating businesses and assets and may in the future undertake significant transactions. Any such
transaction could be material to the Company’s business and could take any number of forms, including mergers, joint ventures, investments in
new lines of business and the purchase of equity interests or assets. The form of consideration for such transactions may include, among other
things, cash, common stock or equity interests in the Company’s subsidiaries. The Company also evaluates the disposition of its operating
businesses and assets, in whole or in part, which could take the form of asset sales, mergers or sales of equity interests in its subsidiaries
(privately or through a public offering), or the spin-off of equity interests of the Company’s subsidiaries to its stockholders.
These types of significant transactions may present significant risks and uncertainties, including distraction of management from current
operations, insufficient revenue to offset liabilities assumed, potential loss of significant revenue and income streams, unexpected expenses,
inadequate return of capital, potential acceleration of taxes currently deferred, regulatory or compliance issues, the triggering of certain
covenants in the Company’s debt instruments (including accelerated repayment) and other unidentified issues not discovered in due diligence.
As a result of the risks inherent in such transactions, the Company cannot guaranty that any such transaction will ultimately result in the
realization of the anticipated benefits of the transaction or that significant transactions will not have a material adverse impact on the Company’s
financial condition or its results of operations. If the Company were to complete such an acquisition, disposition, investment or other strategic
transaction, it may require additional debt or equity financing that could result in a significant increase in its amount of debt or the number of
outstanding shares of its Common Stock.
Investment in new business strategies and initiatives present risks not originally contemplated. The Company has invested, and in the
future may again invest, in new business plans or acquisitions, some of which may not be directly linked to existing business lines or activities.
These activities may involve significant risks and uncertainties, including distraction of management from current operations, insufficient
revenue to offset liabilities assumed and expenses associated with the plans or acquisitions, inadequate return of capital, and unidentified issues
not discovered in due diligence. Investments in these positions also may involve securities that are not very liquid. As a result of the risks
inherent in new ventures, there can be no assurance that any such venture will be successful, or that new ventures will not have a material
adverse impact on the Company’s financial position and its results of operations.
The Company engages in hedging activities which expose it to risks. The Company for corporate purposes and also as part of its energy
trading activities, may use futures and swaps to hedge risks, such as escalation in fuel costs, agricultural materials, movements in foreign
exchange rates and interest rates. The Company may also purchase inventory in larger than usual levels to lock in costs when it believes there
may be large increases in the price of raw materials or other materials used in its businesses. Such purchases expose the Company to risks of
meeting margin calls and drawing on its capital, counterparty risk due to failure of an exchange or institution with which it has done a swap,
incurring higher costs than competitors or similar businesses that do not engage in such strategies, and losses on its investment portfolio. Such
strategies can also cause earnings to be volatile.
The Company’s operations in the U.S. Gulf of Mexico have been adversely impacted by the Deepwater Horizon drilling rig accident
and resulting oil spill. On April 22, 2010, the Deepwater Horizon , a semi-submersible deepwater drilling rig operating in the U.S. Gulf of
Mexico, sank after an apparent blowout and fire resulting in a significant flow of hydrocarbons from the BP Macondo well (the “ Deepwater
Horizon /BP Macondo Well Incident”). The Company’s Offshore Marine Services and Aviation Services segments have extensive operations in
the U.S. Gulf of Mexico, which, along with those of certain of its customers, may be adversely impacted by, among other factors:
•
the previously imposed drilling moratorium by the U.S. Department of the Interior that directed lessees and operators to cease
drilling all new deepwater wells on federal leases in the U.S. Gulf of Mexico, the additional safety and certification requirements for
drilling activities imposed for the approval of
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development and production activities and the delayed approval of applications to drill in both deep and shallow-water areas;
•
the suspension, stoppage or termination by customers of existing contracts and the demand by customers for new or renewed
contracts in the U.S. Gulf of Mexico and other affected regions;
•
unplanned customer suspensions, cancellations, rate reductions or non-renewals of commitments to charter vessels and aviation
equipment or failures to finalize commitments to charter vessels and aviation equipment;
•
new or additional government regulations or laws concerning drilling operations in the U.S. Gulf of Mexico and other regions; and
•
the cost or availability of relevant insurance coverage.
Any one or a combination of these factors could reduce revenues, increase operating costs and have a material adverse effect on the
Company’s financial position and its results of operations.
The Company could incur liability in connection with providing spill response services. The Company may incur increased legal fees and
costs in connection with providing spill and emergency response services, including the Company’s involvement in response to the Deepwater
Horizon /BP Macondo Well Incident. Several of the Company’s business segments are currently defendants in litigation arising from the
Deepwater Horizon /BP Macondo Well Incident and the Company expects it may be named in additional litigation regarding its response
services. Although companies are generally exempt in the United States from liability under the CWA for their own actions and omissions in
providing spill response services, this exemption might not apply if a company were found to have been grossly negligent or to have engaged in
willful misconduct, or if it were to have failed to provide these services consistent with the National Contingency Plan or as otherwise directed
under the CWA. In addition, the exemption under the federal CWA would not protect a company against liability for personal injury or wrongful
death claims, or against prosecution under other federal or state laws. All of the coastal states of the United States in which the Company
provides services have adopted similar exemptions, however, several inland states have not. If a court or other applicable authority were to
determine that the Company does not benefit from federal or state exemptions from liability in providing emergency response services, or if the
other defenses asserted by the Company and its business segments are rejected, the Company could be liable together with the local contractor
and the responsible party for any resulting damages, including damages caused by others, subject to the indemnification provisions and other
liability terms and conditions negotiated with its domestic clients. In the international market, the Company does not benefit from the spill
response liability protection provided by the CWA and, therefore, is subject to the liability terms and conditions negotiated with its international
clients, in addition to any other defenses available to the Company and its business segments. In connection with claims relating to clean-up
operations following the Deepwater Horizon /BP Macondo Well Incident, the responsible party acknowledged and agreed to indemnify and
defend one of the Company’s business segments pursuant and subject to certain contractual agreements.
If Congress repeals the $75.0 million cap for non-reclamation liabilities under OPA 90 or otherwise scales back the protections afforded to
contractors thereunder, there may be increased exposure for remediation work and the cost for securing insurance for such work may become
prohibitively expensive. Without affordable insurance and appropriate legislative regulation limiting liability, drilling, exploration, remediation
and further investment in oil and gas exploration in the U.S. Gulf of Mexico may be discouraged and thus reduce the demand for the Company’s
services.
Negative publicity may adversely impact the Company. Media coverage and public statements that insinuate improper actions by the
Company, regardless of their factual accuracy or truthfulness, may result in negative publicity, litigation or governmental investigations by
regulators. Addressing negative publicity and any resulting litigation or investigations may distract management, increase costs and divert
resources. Negative publicity may have an adverse impact on the Company’s reputation and the morale of its employees, which could adversely
affect the Company’s financial position and its results of operations.
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Increased domestic and international laws and regulations may adversely impact the Company. Changes in laws or regulations
regarding offshore oil and gas exploration and development activities, including the previously imposed drilling moratorium issued by the U.S.
Department of the Interior directing lessees and operators to cease drilling all new deepwater wells on federal leases in the U.S. Gulf of Mexico,
may increase the cost or availability of insurance coverage and may influence decisions by customers or other industry participants that could
reduce the demand for the Company’s services, which would have a negative impact on the Company’s Offshore Marine Services and Aviation
Services segments.
Risks from the Company’s international operations. The Company operates vessels, leases helicopters, provides environmental services
and transacts other business worldwide. Its ability to compete in the international offshore energy support market and environmental services
market may be adversely affected by foreign government regulations that favor or require the awarding of contracts to local competitors, or that
require foreign persons to employ citizens of, or purchase supplies from, a particular jurisdiction. Further, the Company’s foreign subsidiaries
may face governmentally imposed restrictions on their ability to transfer funds to their parent company.
Activity outside the United States involves additional risks, including the possibility of:
•
United States embargoes or restrictive actions by U.S. and foreign governments that could limit the Company’s ability to provide
services in foreign countries;
•
A change in, or the imposition of, withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and
investment;
•
limitations on the repatriation of earnings or currency exchange controls and import/export quotas;
•
local cabotage and local ownership laws and requirements;
•
nationalization, expropriation, asset seizure, blockades and blacklisting;
•
limitations in the availability, amount or terms of insurance coverage;
•
loss of contract rights and inability to enforce contracts;
•
political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist attacks, piracy and
kidnapping;
•
fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for the
Company’s services and its profitability;
•
potential noncompliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the
“FCPA”), and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010;
•
labor strikes;
•
changes in general economic and political conditions; and
•
difficulty in staffing and managing widespread operations.
Unstable political, military and economic conditions in foreign countries where a significant proportion of Offshore Marine Services’
operations are conducted could adversely impact the Company’s business. During the year ended December 31, 2011, approximately 69% of
Offshore Marine Services’ operating revenues resulted from its foreign operations. These operations are subject to risks, including potential
vessel seizure, terrorist attacks, piracy, kidnapping, nationalization of assets, currency restrictions, import or export quotas and other forms of
public and government regulation, all of which are beyond the Company’s control. Economic sanctions or an oil embargo, for example, could
have significant impact on activity in the oil and gas industry and, correspondingly, on the Company should Offshore Marine Services operate
vessels in a country subject to any sanctions or embargo, or in the surrounding region to the extent any sanctions or embargo disrupts its
operations.
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Offshore Marine Services, Marine Transportation Services, Aviation Services and Commodity Trading and Logistics rely on several
customers for a significant share of their revenues, the loss of any of which could adversely affect each of their businesses and operating
results. The portion of Offshore Marine Services’, Marine Transportation Services’, Aviation Services’ and Commodity Trading and Logistics’
revenues attributable to any single customer may change over time, depending on the level of relevant activity by any such customer, the
segment’s ability to meet the customer’s needs and other factors, many of which are beyond the Company’s control. The loss of any large
customer or several mid-size customers could have a material and adverse effect on such segment’s or the Company’s financial position or its
results of operations.
Consolidation of the Company’s customer base could adversely affect demand for its services and reduce its revenues. In recent years,
oil and natural gas companies, energy companies and drilling contractors have undergone substantial consolidation and additional consolidation
is possible. Consolidation results in fewer companies to charter or contract for the Company’s services. Also, merger activity among both major
and independent oil and natural gas companies affects exploration, development and production activity as the consolidated companies integrate
operations to increase efficiency and reduce costs. Less promising exploration and development projects of a combined company may be
dropped or delayed. Such activity may result in an exploration and development budget for a combined company that is lower than the total
budget of both companies before consolidation, which could adversely affect demand for the Company’s Offshore Marine Services’ vessels,
Marine Transportation Services’ tankers, Aviation Services’ helicopters and Environmental Services’ products and services, thereby reducing the
Company’s revenues.
The Company may be unable to maintain or replace its offshore support vessels as they age. As of December 31, 2011, the average age
of the Company’s Offshore Marine Services’ vessels, excluding its standby safety and wind farm utility vessels, was approximately 11 years.
The Company believes that after an offshore support vessel has been in service for approximately 20 years, the expense (which typically
increases with age) necessary to satisfy required marine certification standards may not be economically justifiable. The Company may be
unable to carry out drydockings of its vessels or may be limited by insufficient shipyard capacity, which could adversely affect its ability to
maintain its vessels. In addition, market conditions may not justify these expenditures or enable the Company to operate its older vessels
profitably during the remainder of their economic lives. There can be no assurance that the Company will be able to maintain its fleet by
extending the economic life of existing vessels, or that its financial resources will be sufficient to enable it to make expenditures necessary for
these purposes or to acquire or build replacement vessels.
An increase in the supply of offshore support vessels or tankers could have an adverse impact on the charter rates earned by the
Company’s offshore support vessels and tankers. Expansion of the supply of the worldwide offshore support vessel fleet would increase
competition in the markets in which Offshore Marine Services operates. The refurbishment of disused or “mothballed” vessels, conversion of
vessels from uses other than oil and gas exploration and production support and related activities or construction of new vessels could all add
vessel capacity to current worldwide levels. A significant increase in vessel capacity could lower charter rates and result in lower operating
revenues. Similarly, should competitors in the domestic petroleum and chemical product tanker industry construct a significant number of new
tankers or large capacity integrated or articulated tug and barge units, demand for tanker assets could be adversely affected.
If the Company does not restrict the amount of foreign ownership of its Common Stock, it could be prohibited from operating offshore
support vessels, inland river vessels and barges and tankers in the United States and could be prohibited from operating helicopters, which
would adversely impact its business and operating results. The Company is subject to the Jones Act, which governs, among other things, the
ownership and operation of offshore support vessels, tankers and barges used to carry cargo between U.S. ports. The Jones Act requires that
vessels engaged in the U.S. coastwise trade be built in the United States, registered under the U.S. flag, manned by predominantly U.S. crews,
and owned and operated by U.S. citizens within the meaning of
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the Jones Act. The Company is also subject to regulations pursuant to the Federal Aviation Act and other statutes (“Aviation Acts”). Generally,
aircraft operating in the United States must be registered in the United States. In order to register such aircraft under the Aviation Acts, the
Company must be owned or controlled by U.S. citizens. Although SEACOR’s Restated Certificate of Incorporation and by-laws contain
provisions intended to assure compliance with these provisions of the Jones Act and the Aviation Acts, a failure to maintain compliance would
adversely affect the Company’s financial position and its results of operations and the Company would be prohibited from operating vessels in
the U.S. coastwise trade and helicopters in the United States during any period in which the Company does not comply or cannot demonstrate to
the satisfaction of the relevant governmental authorities the Company’s compliance with the Jones Act and the Aviation Acts. In addition, the
Company could be subject to fines and its vessels could be subject to seizure and forfeiture for violations of the Jones Act and the related U.S.
vessel documentation laws.
Repeal, Amendment, Suspension or Non-Enforcement of the Jones Act would result in additional competition for Offshore Marine
Services, Marine Transportation Services and Inland River Services and could have a material adverse effect on the Company’s business. A
substantial portion of the operations of Offshore Marine Services, Marine Transportation Services and Inland River Services are conducted in the
U.S. coastwise trade. Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S. coastwise trade be built in the United
States, registered under the U.S. flag, manned by predominantly U.S. crews, and owned and operated by U.S. citizens within the meaning of the
Jones Act. There have been attempts to repeal or amend such provisions, and such attempts are expected to continue in the future. Repeal,
substantial amendment or wavier of such provisions would result in additional competition from vessels built in lower-cost foreign shipyards,
owned and manned by foreign nationals with promotional foreign tax incentives and with lower wages and benefits than U.S. citizens, which
could have a material adverse effect on the Company’s business, financial position and its results of operations. In addition, the Company’s
advantage as a U.S.-citizen operator of Jones Act vessels could be eroded by periodic efforts and attempts by foreign interests to circumvent
certain aspects of the Jones Act. If maritime cabotage services were included in the General Agreement on Trade in Services, the North
American Free Trade Agreement or other international trade agreements, or if the restrictions contained in the Jones Act were otherwise altered,
the shipping of maritime cargo between covered U.S. ports could be opened to foreign-flag or foreign-built vessels.
Restrictions on foreign ownership of the Company’s vessels could limit its ability to sell off any portion of its business or result in the
forfeiture of its vessels. Compliance with the Jones Act requires that non-U.S. citizens own no more than 25% in the entities that directly or
indirectly own the vessels that the Company operates in the U.S. coastwise trade. If the Company were to seek to sell any portion of its business
that owns any of these vessels, it would have fewer potential purchasers, since some potential purchasers might be unable or unwilling to satisfy
the U.S. citizenship restrictions described above. As a result, the sales price for that portion of the Company’s business may not attain the
amount that could be obtained in an unregulated market. Furthermore, if at any point the Company or any of the entities that directly or
indirectly own its vessels cease to satisfy the requirements to be a U.S. citizen within the meaning of the Jones Act, the Company would become
ineligible to operate in the U.S. coastwise trade and may become subject to penalties and risk forfeiture of its vessels.
SEACOR’s certificate of incorporation limits the ownership of Common Stock by individuals and entities that are not U.S. citizens
within the meaning of the Jones Act. These restrictions may affect the liquidity of the SEACOR’s Common Stock and may result in non-U.S.
citizens being required to sell their shares at a loss or relinquish their voting, dividend and distribution rights. Under the Jones Act, at least
75% of the outstanding shares of each class or series of SEACOR’s capital stock must be owned and controlled by U.S. citizens within the
meaning of the Jones Act. Certain provisions of SEACOR’s certificate of incorporation are intended to facilitate compliance with this
requirement and may have an adverse effect on holders of shares of the Common Stock.
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Under the provisions of SEACOR’s Restated Certificate of Incorporation, the aggregate percentage of ownership by non-U.S. citizens of
any class of SEACOR’s capital stock (including Common Stock) is limited to 22.5% of the outstanding shares of each such class to ensure that
such foreign ownership will not exceed the maximum percentage permitted by the Jones Act, which is presently 25%. (The Restated Certificate
of Incorporation authorizes SEACOR’s Board of Directors, under certain circumstances, to increase the foregoing permitted percentage to 24%.)
The Restated Certificate of Incorporation further provides that any issuance or transfer of shares to non-U.S. citizens in excess of such permitted
percentage shall be ineffective as against the Company and that neither the Company nor its transfer agent shall register such purported issuance
or transfer of shares to non-U.S. citizens or be required to recognize the purported transferee or owner as a stockholder of the Company for any
purpose whatsoever except to exercise the Company’s remedies. Any such excess shares in the hands of a non-U.S. citizen shall not have any
voting or dividend rights and are subject to redemption by the Company in its discretion. The liquidity or market value of the shares of common
stock may be adversely impacted by such transfer restrictions.
As a result of the above provisions, a proposed transferee of the Common Stock that is a non-U.S. citizen may not receive any return on its
investment in shares it purportedly purchases or owns, as the case may be, and it may sustain a loss. The Company, in its discretion, is entitled to
redeem all or any portion of such shares most recently acquired (as determined by its Board of Directors in accordance with guidelines that are
set forth in its Restated Certificate of Incorporation), by non-U.S. citizens, in excess of such maximum permitted percentage for such class or
series at a redemption price based on a fair market value formula that is set forth in the Company’s Restated Certificate of Incorporation, which
may be paid in cash or promissory notes at the discretion of the Company. Such excess shares shall also not be accorded any voting, dividend or
distribution rights until they have ceased to be excess shares, provided that they have not been already redeemed by the Company. As a result of
these provisions, a purported stockholder who is a non-U.S. citizen may be required to sell its shares of Common Stock at an undesirable time or
price and may not receive any return on its investment in such shares. Further, the Company may have to incur additional indebtedness, or use
available cash (if any), to fund all or a portion of such redemption, in which case the Company’s financial condition may be materially
weakened.
So that the Company may ensure its compliance with the Jones Act, its Restated Certificate of Incorporation permits it to require that
owners of any shares of its capital stock provide confirmation of their citizenship. In the event that a person does not submit such documentation
to the Company, its Restated Certificate of Incorporation provides the Company with certain remedies, including the suspension of the payment
of dividends and distributions with respect to those shares into an escrow account. As a result of non-compliance with these provisions, an owner
of the shares of the Company’s Common Stock may lose significant rights associated with those shares.
In addition to the risks described above, the foregoing foreign ownership restrictions could delay, defer or prevent a transaction or change
in control that might involve a premium price for the Company’s Common Stock or otherwise be in the best interest of the Company’s
stockholders.
If non-U.S. citizens own more than 22.5% of SEACOR’s Common Stock, the Company may not have the funds or the ability to redeem
any excess shares and it could be forced to suspend its operations in the U.S. coastwise trade. SEACOR’s Restated Certificate of Incorporation
contains provisions prohibiting ownership of its Common Stock by non-U.S. citizens, in the aggregate, in excess of 22.5% of such shares. In
addition, the Restated Certificate of Incorporation permits the Company to redeem such excess shares. The per share redemption price may be
paid, as determined by the Company’s Board of Directors, by cash or promissory notes. However, the Company may not be able to redeem such
excess shares for cash because its operations may not have generated sufficient excess cash flow to fund such redemption. If, for any reason, the
Company is unable to effect such a redemption when such ownership of shares by non-U.S. citizens is in excess of 25.0% of the Common Stock,
or otherwise prevent non-U.S. citizens in the aggregate from owning shares in excess of 25.0% of any such class or series of the Company’s
capital stock, or fail to exercise its redemption rights because it is unaware that such ownership exceeds such percentage, the Company will
likely be unable to comply with the
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Jones Act and will likely be required by the applicable governmental authorities to suspend its operations in the U.S. coastwise trade. Any such
actions by governmental authorities would have a severely detrimental impact on the Company’s financial position and its results of operations.
The Outer Continental Shelf Lands Act, as amended, provides the federal government with broad discretion in regulating the leasing of
offshore resources for the production of oil and gas. Because Offshore Marine Services’ and Aviation Services’ operations rely on offshore oil
and gas exploration and production, the government’s exercise of authority under the provisions of the Outer Continental Shelf Lands Act to
restrict the availability of offshore oil and gas leases could have a material adverse effect on the Company’s financial position and its results of
operations.
Operational risks could disrupt operations and expose the Company to liability. The operation of offshore support vessels, tankers, rollon/roll-off vessels, inland river towboats, tugs, helicopters, oil spill response vessels and barges is subject to various risks, including catastrophic
disaster, adverse weather, mechanical failure and collision. Additional risks to vessels include adverse sea conditions, capsizing, grounding, oil
and hazardous substance spills and navigation errors. These risks could endanger the safety of the Company’s personnel, equipment, cargo and
other property, as well as the environment. If any of these events were to occur, the Company could be held liable for resulting damages,
including loss of revenues from or termination of charter contracts, higher insurance rates, and damage to the Company’s reputation and
customer relationships. In addition, the affected vessels or helicopters could be removed from service and would then not be available to
generate revenues.
Operational risks related to Aviation Services including, but not limited to, safety issues with respect to certain helicopter models and
equipment failure could adversely impact results of operations and in some instances, expose the Company to liability. Risks relating to the
operation of helicopters include harsh weather and marine conditions, mechanical failures, crashes, and collisions, which may result in personal
injury, loss of life, damage to property and equipment, and the suspension or reduction of operations. The Company’s aircraft have been
involved in accidents in the past, some of which have included loss of life and property damage. The Company may experience similar accidents
in the future. If the Company or other operators experience incidents with helicopter models that the Company operates or contract-leases,
obligating the Company to take such helicopters out of service until the cause of the incidents is rectified, the Company would lose revenue and
might lose customers. In addition, safety issues experienced by a particular model of helicopter could result in customers refusing to use a
particular helicopter model or a regulatory body grounding that particular helicopter model. The value of the helicopter model might also be
permanently reduced in the market if the model were to be considered less desirable for future service.
Helicopter operations involve risks that may not be covered by the Company’s insurance or the Company’s insurance may be
inadequate to protect it from the liabilities that could arise. The operation of helicopters inherently involves a degree of risk. Hazards include
adverse weather conditions, collisions, fire and mechanical failures, which may result in death or injury to personnel, damage to equipment, loss
of operating revenues, contamination of cargo, pollution and other environmental damages and increased costs. The Company also is exposed to
liabilities including aviation malfunctions and crashes, FAA and foreign aviation regulation compliance, including grounding certain aircraft,
and environmental compliance. The Company also may be adversely affected by accidents involving aircraft that it does not own or operate,
particularly if they involve the same model of aircraft as in the Company’s fleet. The Company carries insurance, including hull and liability,
liability and war risk, general liability, workers’ compensation, and other insurance customary in the industry in which it operates. The Company
also conducts training and safety programs to promote a safe working environment and minimize hazards. The Company’s insurance coverage is
subject to deductibles and maximum coverage amounts. The Company’s insurance policies are also subject to compliance with certain
conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular insurance policy. The
amount of insurance coverage the Company is able to maintain may be inadequate to cover all potential liabilities or the total amount of insured
claims and liabilities. The Company cannot assure that its existing insurance coverage can be renewed at commercially reasonable rates or that it
will be possible to obtain
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insurance to protect against all of its operational risks and liabilities. Any material liability not covered by insurance or for which third-party
indemnification is not available, would have a material adverse effect on the Company’s financial condition, results of operations and/or cash
flows.
Revenues from Aviation Services are dependent on flight hours, which are subject to adverse weather conditions and seasonality. A
significant portion of the Company’s revenues from Aviation Services is dependent on actual flight hours. Prolonged periods of adverse weather,
storms and the effect of fewer hours of daylight adversely impact Aviation Services. Winter months generally have more days of adverse
weather conditions than the other months of the year, with poor visibility, high winds, heavy precipitation and fewer daylight hours, all of which
adversely affect helicopter operations. In addition, June through November is tropical storm season in the U.S. Gulf of Mexico; during tropical
storms, helicopters are unable to operate in the area of a storm. In addition, many of Aviation Services’ facilities are located along the U.S. Gulf
of Mexico coast, and tropical storms may cause damage to its property.
The helicopter industry is subject to intense competition. The helicopter industry is highly competitive and involves an aggressive bidding
process among providers having the necessary equipment, operational experience and resources. The Company must provide safe and efficient
service or risk losing customers or the termination of contracts, which could result in lost market share and have a material adverse effect on the
Consolidation in the aircraft parts industry could affect the service and operation of Aviation Services’ helicopters. A reduction in the
number of approved parts suppliers or a consolidation in the spare parts redistribution market could interrupt or delay the supply of aircraft
components, adversely affecting Aviation Services’ ability to meet service commitments to customers and could cause Aviation Services to lose
opportunities with existing and future customers. Aviation Services might not be able to qualify or identify alternative suppliers in a timely
fashion, or at all. Consolidations involving suppliers could further reduce the number of alternatives for Aviation Services and affect the cost of
components. An increase in the cost of components could make Aviation Services less competitive and result in lower margins.
Revenues from Marine Transportation Services could be adversely affected by a decline in demand for domestic refined petroleum
products, crude oil or chemical products, or a change in existing methods of delivery. A reduction in domestic consumption of refined
petroleum products, crude oil or chemical products, the development of alternative methods of delivery of refined petroleum, crude oil, and a
reduction in domestic refining capacity could reduce demand for the Company’s services.
Construction of additional refined petroleum product, natural gas or crude oil pipelines could have a material adverse effect on Marine
Transportation Services’ revenues. Long-haul transportation of refined petroleum products, crude oil and natural gas is generally less costly by
pipeline than by tanker. Existing pipeline systems are either insufficient to meet demand in, or do not reach all of, the markets served by Marine
Transportation Services’ tankers. The construction and operation of new pipeline segments to the Florida market could have a material and
adverse effect on Marine Transportation Services’ business.
The Company is subject to complex laws and regulations, including environmental laws and regulations that can adversely affect the
cost, manner or feasibility of doing business. Increasingly stringent federal, state, local and international laws and regulations governing worker
safety and health and the manning, construction and operation of vessels significantly affect the Company’s operations. Many aspects of the
marine industry are subject to extensive governmental regulation by the USCG, Occupational Safety and Health Administration (“OSHA”), the
National Transportation Safety Board (“NTSB”) and the U.S. Customs and Border Protection, and to regulation by port states and class society
organizations, such as the American Bureau of Shipping, as well as to international regulations from international treaties, such as the Safety of
Life at Sea convention administered by port states and class societies. The USCG, OSHA and NTSB set safety standards and are authorized to
investigate vessel accidents and recommend improved safety standards. The U.S. Customs and Boarder Protection and USCG are authorized to
inspect vessels at will.
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The Company’s business and operations are also subject to federal, state, local and international laws and regulations that control the
discharge of oil and hazardous materials into the environment or otherwise relate to environmental protection and occupational safety and health.
Compliance with such laws and regulations may require installation of costly equipment or operational changes, and the phase-out of certain
product tankers. Failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the
suspension or termination of the Company’s operations. Some environmental laws impose strict and, under certain circumstances, joint and
several liability for remediation of spills and releases of oil and hazardous materials and damage to natural resources, which could subject the
Company to liability without regard to whether it was negligent or at fault. These laws and regulations may expose the Company to liability for
the conduct of or conditions caused by others, including charterers. Moreover, these laws and regulations could change in ways that substantially
increase the Company’s costs. The Company cannot be certain that existing laws, regulations or standards, as currently interpreted or
reinterpreted in the future, or future laws and regulations will not have a material adverse effect on its business, results of operations and
financial condition. For more information, see Item 1. “Government Regulation – Environmental Compliance.”
Emergency response revenues are subject to significant volatility. Environmental Services’ response revenues and profitability are event
driven and can vary greatly from quarter-to-quarter and year-to-year based on the number and magnitude of responses.
A change in oil spill regulation could reduce demand for Environmental Services’ emergency response services. Environmental
Services is dependent upon regulations promulgated under OPA 90, international conventions and, to a lesser extent, local regulations. A change
in emergency regulations and/or increased competition from non-profit competitors could decrease demand for Environmental Services’
emergency response services and/or increase costs without a commensurate increase in revenue.
A relaxation of oil spill regulation or enforcement could reduce demand for Environmental Services’ emergency response services.
Environmental Services is dependent upon the enforcement of regulations promulgated under OPA 90, international conventions and, to a lesser
extent, local regulations. Less stringent emergency regulations or less aggressive enforcement of these regulations could decrease demand for
Environmental Services’ emergency response services. There can be no assurance that oil spill regulation will not be relaxed or enforcement of
existing or future regulation will not become less stringent. If this happens, the demand for Environmental Services’ emergency response
services could be adversely impacted.
A change in, or revocation of, National Response Corporation’s classification as an Oil Spill Removal Organization could result in a
loss of business. The National Response Corporation (“NRC”) is classified by the USCG as an Oil Spill Removal Organization (“OSRO”). The
USCG classifies OSROs based on their overall ability to respond to various types and sizes of oil spills. USCG-classified OSROs have a
competitive advantage over non-classified service providers because customers of a classified OSRO may cite classified OSROs in their
response plans in lieu of listing their oil spill response resources in filings with the USCG. A loss of NRC’s classification or changes in the
requirements for classification could eliminate or diminish NRC’s ability to provide customers with this exemption. If this happens,
Environmental Services could lose customers.
Environmental Services could incur liability in connection with providing spill response services. Although Environmental Services is
generally exempt in the United States from liability under the CWA for its own actions and omissions in providing spill response services, this
exemption might not apply if it were found to have been grossly negligent or to have engaged in willful misconduct, or if it were to have failed
to provide these services consistent with applicable regulations and directives under the CWA. In addition, the exemption under the federal
CWA would not protect Environmental Services against liability for personal injury or wrongful death, or against prosecution under other
federal or state laws. Although most of the states within the United States in which Environmental Services provides services have adopted
similar exemptions, several states have not. If a court or other applicable authority were to determine that Environmental Services does not
benefit from federal or state exemptions from liability in providing emergency response services, Environmental
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Services could be liable together with the local contractor and the responsible party for any resulting damages, including damages caused by
others. In the international market, Environmental Services does not benefit from the spill response liability protection provided by the CWA and
therefore is subject to the liability terms and conditions negotiated with its international clients.
Inland River Services could experience variation in freight rates. Freight transportation rates may fluctuate as the volume of cargo and
availability of barges change. The volume of freight transported on the Inland River Waterways may vary as a result of various factors, such as
global economic conditions and business cycles, domestic and international agricultural production and demand, and foreign currency exchange
rates. Barge participation in the industry can also vary year-to-year and is dependent on the number of barges built and retired from service.
Extended periods of high barge availability and low cargo demand could adversely impact Inland River Services.
Inland River Services’ results of operations could be adversely affected by the decline in U.S. grain exports. Inland River Services’
business is significantly affected by the volume of grain exports handled through ports in the U.S. Gulf of Mexico. Grain exports can vary due to
a number of factors including crop harvest yield levels in the United States and abroad, and the demand for grain in the United States. A shortage
of available grain overseas can increase demand for U.S. grain. Conversely, an abundance of grain overseas can decrease demand for U.S. grain.
A decline in exports could result in excess barge capacity, which would likely lower freight rates earned by Inland River Services.
Inland River Services’ results of operations could be adversely affected by international economic and political factors. The actions of
foreign governments could affect the import and export of the dry-bulk commodities typically transported by Inland River Services. Foreign
trade agreements and each country’s adherence to the terms of such agreements can raise or lower demand for U.S. imports and exports of the
dry-bulk commodities that Inland River Services transports. National and international boycotts and embargoes of other countries’ or U.S.
imports or exports together with the raising or lowering of tariff rates could affect the demand for the transportation of cargos handled by Inland
River Services. These actions or developments could have an adverse impact on Inland River Services.
Inland River Services’ results of operations are affected by seasonal activity. Inland River Services’ business is seasonal, and its quarterly
revenues and profits have historically been lower in the first and second quarters of the year and higher in the third and fourth quarters, during
the grain harvest.
Inland River Services’ results of operations are affected by adverse weather and river conditions. Weather patterns can affect river levels
and cause ice conditions during winter months, which can hamper barge navigation. Locks and dams on river systems may be closed for
maintenance or other causes, which may delay barge movements. These conditions could adversely impact Inland River Services.
The aging infrastructure on the U.S. Inland River Waterways may lead to increased costs and disruptions in Inland River Services’
operations. Many of the locks and dams on the U.S. Inland River Waterways were built early in the last century, and their age makes them costly
to maintain and susceptible to unscheduled maintenance outages. Delays caused by malfunctioning locks and dams could increase Inland River
Services’ operating costs and delay the delivery of cargos. Moreover, in the future, increased diesel fuel user taxes could be imposed to fund
necessary infrastructure improvements, and such increases may not be recoverable by Inland River Services through pricing increases.
Inland River Services’ results of operations could be materially and adversely affected by fuel price fluctuations. For the most part,
Inland River Services purchases towboat and fleeting services from third party vendors. The price of these services can rise when fuel prices
escalate and could adversely impact Inland River Services’ results of operation.
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The Company’s insurance coverage may be inadequate to protect it from the liabilities that could arise in its businesses. Although the
Company maintains insurance coverage against the risks related to its businesses, risks may arise for which the Company may not be insured.
Claims covered by insurance are subject to deductibles, the aggregate amount of which could be material. Insurance policies are also subject to
compliance with certain conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular
insurance policy. There also can be no assurance that existing insurance coverage can be renewed at commercially reasonable rates or that
available coverage will be adequate to cover future claims. If a loss occurs that is partially or completely uninsured, the Company could be
exposed to substantial liability.
The Company’s global operations are subject to certain foreign currency, interest rate, fixed-income, equity and commodity price risks.
The Company is exposed to certain foreign currency, interest rate, fixed-income, equity and commodity price risks. Some of these risks may be
hedged, but fluctuations could impact the Company’s financial position and its results of operations. The Company has, and anticipates that it
will continue to have, contracts denominated in foreign currencies. It is often not practicable for the Company to effectively hedge the entire risk
of significant changes in currency rates during a contract period. The Company’s financial position and its results of operations have been
negatively impacted for certain periods and positively impacted for other periods, and may continue to be affected to a material extent by the
impact of foreign currency exchange rate fluctuations. The Company’s financial position and its results of operations may also be affected by the
cost of hedging activities that the Company undertakes. The Company holds a large proportion of its net assets in cash equivalents and shortterm investments, including a variety of public and private debt and equity instruments. Such investments subject the Company to risks generally
inherent in the capital markets. Given the relatively high proportion of the Company’s liquid assets relative to its overall size, its financial
position and its results of operations may be materially affected by the results of the Company’s capital management and investment activities
and the risks associated with those activities. Volatility in the financial markets and overall economic uncertainty also increase the risk that the
actual amounts realized in the future on the Company’s debt and equity instruments could differ significantly from the fair values currently
assigned to them. In addition, changes in interest rates may have an adverse impact on the Company’s financial position and its results of
operations.
Commodity Trading and Logistics’ results of operations may be materially adversely affected by the availability, demand and price of
agricultural commodities, weather, disease, government programs, and competition. The availability and price of agricultural commodities
may fluctuate widely due to unpredictable factors such as weather, plantings, government programs and policies, changes in global demand
resulting from population growth and changes in standards of living, and global production of similar and competitive crops. Reduced supply of
agricultural commodities due to weather-related factors or other reasons could adversely affect Commodity Trading and Logistics’ profitability.
Reduced supplies of agricultural commodities could limit Commodity Trading and Logistics’ ability to procure, transport, store, process, and
merchandise agricultural commodities in an efficient manner. In addition, the availability and price of agricultural commodities can be affected
by other factors, such as plant disease, which can result in crop failures and reduced harvests.
Commodity Trading and Logistics’ is subject to economic downturns, political instability and other risks of doing business globally,
which could adversely affect operating results. Commodity Trading and Logistics conducts its business in many countries and geographic areas,
and plans to expand its business in emerging market areas such as Asia, Africa and parts of the Caribbean. Both developed and emerging market
areas are subject to economic downturns and emerging market areas could be subject to more volatile economic, political and market conditions.
Such economic downturns and volatile conditions may have a negative impact on Commodity Trading and Logistics’ ability to execute its
business strategies and on its financial position and its results of operations. Commodity Trading and Logistics’ results of operations could be
affected by changes in trade, monetary and fiscal policies, laws and regulations, and other activities of governments, agencies, and similar
organizations, including political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and
regulations, burdensome taxes and tariffs, enforceability of legal agreements and judgments, and other trade barriers.
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Commodity Trading and Logistics is subject to government policies and regulations, in general, and specifically those affecting the
agricultural sector and related industries, which could adversely affect its operating results. Agricultural production and trade flows are
subject to government policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies,
incentives and import and export restrictions on agricultural commodities and commodity products, can influence the planting of certain crops,
the location and size of crop production, whether unprocessed or processed commodity products are traded, the volume and types of imports and
exports, the availability and competitiveness of feedstocks as raw materials, and industry profitability. In addition, international trade disputes
can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. Future government policies
may adversely affect the supply of, demand for, and prices of Commodity Trading and Logistics’ products, restrict its ability to do business in its
existing and target markets, and negatively impact revenues and operating results.
Commodity Trading and Logistics is subject to numerous laws and regulations globally that could adversely affect operating results.
Commodity Trading and Logistics is required to comply with the numerous and broad reaching laws and regulations administered by United
States federal, state, local, and foreign governmental agencies relating to, but not limited to, the sourcing, transporting, storing and
merchandising of agricultural commodities and products. Any failure to comply with applicable laws and regulations could subject Commodity
Trading and Logistics to administrative penalties and injunctive relief, civil remedies, including fines, injunctions, and recalls of its products.
Commodity Trading and Logistics’ risk management strategies may not be effective. Commodity Trading and Logistics’ business is
affected by counterparty risk including non-performance by suppliers, vendors and counterparties, fluctuations in agricultural commodity prices,
transportation costs, energy prices, interest rates, and foreign currency exchange rates. Although Commodity Trading and Logistics may engage
in hedging transactions to manage these risks, such transactions may not be successful in mitigating its exposure to these fluctuations and may
adversely affect operating results.
The Company’s inability to attract and retain qualified personnel could have an adverse effect on its business. Attracting and retaining
skilled personnel across all of the Company’s business segments is an important factor in its future success. The market for the personnel
employed is highly competitive and the Company cannot be certain that it will be successful in attracting and retaining qualified personnel in the
future.
The failure to successfully complete construction or conversion of the Company’s vessels, repairs, maintenance or routine drydockings
on schedule and on budget could adversely affect the Company’s financial position and its results of operations. From time to time, the
Company may have a number of vessels under conversion and may plan to construct or convert other vessels in response to current and future
market conditions. The Company also routinely engages shipyards to drydock vessels for regulatory compliance and to provide repair and
maintenance. Construction and conversion projects and drydockings are subject to risks of delay and cost overruns, resulting from shortages of
equipment, lack of shipyard availability, unforeseen engineering problems, work stoppages, weather interference, unanticipated cost increases,
inability to obtain necessary certifications and approvals and shortages of materials or skilled labor. A significant delay in either construction or
drydockings could have a material adverse effect on contract commitments and revenues with respect to vessels under construction, conversion
or undergoing drydockings. Significant cost overruns or delays for vessels under construction, conversion or retrofit could also adversely affect
the Company’s financial position and its results of operations.
A Violation of the Foreign Corrupt Practices Act may adversely affect the Company’s business and operations. In order to effectively
compete in certain foreign jurisdictions, the Company seeks to establish joint ventures with local operators or strategic partners. As a U.S.
corporation, the Company is subject to the regulations imposed by the FCPA, which generally prohibits U.S. companies and their intermediaries
from making improper payments to foreign officials for the purpose of obtaining or maintaining business. The Company has adopted stringent
procedures to enforce compliance with the FCPA, but it may be held liable for
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actions taken by its strategic or local partners even though these partners may not be subject to the FCPA. Any determination that the Company
has violated the FCPA could have a material adverse effect on its business and results of operations.
An outbreak of any contagious disease, such as H1N1 Flu, may adversely affect the Company’s business and operations. The outbreak
of diseases, such as H1N1 Flu, commonly referred to as Swine Flu, has curtailed and may curtail travel to and from certain countries, or
geographic regions. Restrictions on travel to and from these countries or other regions due to additional incidences for diseases, such as Swine
Flu, could have a material adverse effect on the Company’s business, financial position or its results of operations.
There are risks associated with climate change and environmental regulations. Governments around the world have, in recent years,
placed increasing attention on matters affecting the environment and this could lead to new laws or regulations pertaining to climate change,
carbon emissions or energy use that in turn could result in a reduction in demand for hydrocarbon-based fuel. Governments could also pass laws
or regulations encouraging or mandating the use of alternative energy sources such as wind power and solar energy, which may reduce demand
for oil and natural gas and therefore the services provided by the Company. Such initiatives could have a material adverse effect on the
Ineffective Internal Controls could impact the Company’s Business and Operating Results : The Company’s internal control over
financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the
circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the
preparation and fair presentation of financial statements. If the Company fails to maintain the adequacy of its internal controls, including any
failure to implement required new or improved controls, or if the Company experiences difficulties in their implementation, the Company’s
business and operating results could be harmed and the company could fail to meet its financial reporting obligations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Offshore support vessels, helicopters, inland river towboats and barges, and tankers are the principal physical properties owned by the
Company and are more fully described in “Offshore Marine Services,” “Aviation Services,” “Inland River Services” and “Marine Transportation
Services” and in “Item 1. Business.”
ITEM 3.
LEGAL PROCEEDINGS
On June 12, 2009, a purported civil class action was filed against the Company, Era Group Inc., Era Helicopters LLC and three other
defendants (collectively, the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v.
Bristow Group Inc., et al., No. 09-CV-438 (D. Del.). The Complaint alleges that the Defendants violated federal antitrust law by conspiring with
each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to
December 2005. The purported class of plaintiffs includes all direct purchasers of such services and the relief sought includes compensatory
damages and treble damages. The Company believes that the claims set forth in the Complaint are without merit and intends to vigorously
defend the action. On September 4, 2009, the Defendants filed a motion to dismiss the Complaint. On September 14, 2010, the Court entered an
order dismissing the Complaint. On September 28, 2010, the plaintiffs filed a motion for reconsideration and amendment and a motion for reargument (the “Motions”). On November 30, 2010, the Court granted the Motions, amended the Court’s September 14, 2010 Order to clarify
that the dismissal was without prejudice, permitted the filing of an Amended Complaint, and authorized limited discovery with respect to the
new allegations in the Amended Complaint. Following the completion of such limited discovery, on
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February 11, 2011, the Defendants filed a motion for summary judgment to dismiss the Amended Complaint with prejudice. On June 23, 2011,
the Court granted summary judgment for the Defendants. On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for
the Third Circuit. On August 9, 2011, Defendants moved for certain excessive costs, expenses, and attorneys’ fees under 28 U.S.C. § 1927. That
motion is fully briefed and a decision is pending. On October 11, 2011, the plaintiffs filed their opening appeal brief with the U.S. Court of
Appeals for the Third Circuit. That motion is fully briefed and oral argument is calendared for March 20, 2012. The Company is unable to
estimate the potential exposure, if any, resulting from these claims but believes they are without merit and will continue to vigorously defend the
action.
On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for
the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.) (the “Robin Case”), in
which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred
aboard the semi-submersible drilling rig, the Deepwater Horizon , were negligent in their efforts to save lives and put out the fire and contributed
to the sinking of the Deepwater Horizon and subsequent oil spill. The action now is part of the overall multi-district litigation, In re Oil Spill by
the Oil Rig “Deepwater Horizon”, MDL No. 2179 (“MDL”). The complaint seeks compensatory, punitive, exemplary, and other damages. In
response to this lawsuit, the Company filed petitions seeking exoneration from, or limitation of liability in relation to, any actions that may have
been taken by vessels owned by the Company to extinguish the fire. Pursuant to the Limitation of Liability Act, those petitions imposed an
automatic stay on the Robin Case, and the court set a deadline of April 20, 2011 for individual claimants to assert claims in the limitation cases.
Approximately 66 claims were submitted by the deadline in all of the limitation actions. On June 8, 2011, the Company moved to dismiss these
claims (with the exception of one claim filed by a Company employee) on various legal grounds. On October 12, 2011, the Court granted the
Company’s motion to dismiss in its entirety, dismissing with prejudice all claims that had been filed against the Company in the limitation
actions (with the exception of one claim filed by a Company employee that was not subject to the motion to dismiss). The Court entered final
judgments in favor of the Company in the Robin case and each of the limitation actions on November 21, 2011. On December 12, 2011, the
claimants appealed each of those judgments to the Unites States Court of Appeals for the Fifth Circuit. A briefing schedule for the appeals has
not yet been established. The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without
merit and will continue to vigorously defend the action.
On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of
Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in
which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in
connection with the provision of remediation, containment and response services by O’Brien’s Response Management Inc. (“O’Brien’s”), a
subsidiary of SEACOR. The action now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical
monitoring program” for all individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response
Program” who allegedly experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal.
Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to
indemnify and defend O’Brien’s in connection with the Wunstell Action and claims asserted in the MDL.
On December 15, 2010, SEACOR subsidiaries O’Brien’s and National Response Corporation (“NRC”) were named as defendants in one
of the several consolidated “master complaints” that have been filed in the overall MDL. The master complaint naming O’Brien’s and NRC
asserts various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally, and the use of
dispersants specifically. By court order, the Wunstell Action has been stayed as a result of the filing of the referenced master complaint. The
Company believes that the claims asserted against its subsidiaries in the master complaint have no merit and on February 28, 2011, O’Brien’s
and NRC moved to dismiss all claims against them in the master complaint on legal grounds. On September 30, 2011, the Court granted in part
and denied in part the motion to
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dismiss that O’Brien’s and NRC had filed (an amended decision was issued on October 4, 2011 that corrected several grammatical errors and
non-substantive oversights in the original order). Although the Court refused to dismiss the referenced master complaint in its entirety at that
time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that O’Brien’s and NRC advanced
and has directed O’Brien’s and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the
arguments. A schedule for such limited discovery and future motion practice has been established by the Court and currently contemplates that
O’Brien’s and NRC will file motions re-asserting their derivative immunity and implied preemption arguments on May 18, 2012. The Court did,
however, dismiss all state-law claims and certain other claims that had been asserted in the referenced master complaint, and dismissed the
claims of all plaintiffs that have failed to allege a legally-sufficient injury. Finally, the Court stated that the plaintiffs could file an amended
master complaint and the plaintiffs have indicated that they intend to do so. In addition to the indemnity provided to O’Brien’s, pursuant to
contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and
defend O’Brien’s and NRC in connection with these claims in the MDL.
Subsequent to the filing of the referenced master complaint, four additional individual civil actions have been filed in the U.S. District
Court for the Eastern District of Louisiana concerning the clean-up activities generally, which name the Company, O’Brien’s and/or NRC as
defendants and are part of the overall MDL. On April 8, 2011, O’Brien’s was named as a defendant in Johnson Bros. Corporation of Louisiana v.
BP, PLC, et al., No. 2:11-cv-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a
construction project alleged to have resulted from the clean-up operations. On April 15, 2011, O’Brien’s and NRC were named as defendants in
James and Krista Pearson v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00863 (E.D. La.), which is a suit by a husband and wife, who
allegedly participated in the clean-up effort and are seeking damages for personal injury, property damage to their boat, and amounts allegedly
due under contract. On April 15, 2011, O’Brien’s and NRC were named as defendants in Thomas Edward Black v. BP Exploration &
Production, Inc., et al., No. 2:11-cv-00867 (E.D. La.), which is a suit by an individual who is seeking damages for lost income because he
allegedly could not find work in the fishing industry after the oil spill. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v.
BP, PLC, et al., No. 2:11-cv-00951 (E.D. La.) on behalf of 117 individual plaintiffs that seek to adopt the allegations made in the referenced
master complaint against O’Brien’s and NRC (and the other defendants). By court order, all four of these additional individual cases have been
stayed as a result of the filing of the referenced master complaint. The Company is unable to estimate the potential exposure, if any, resulting
from this matter but believes it is without merit and does not expect this matter will have a material effect on the Company’s consolidated
financial position or its results of operations.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and
Transocean Deepwater Inc. (collectively “Transocean”) named O’Brien’s and NRC as third-party defendants in a Rule 14(c) Third-Party
Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to O’Brien’s and NRC the claims
in the referenced master complaint that have already been asserted against O’Brien’s and NRC. Transocean, Cameron International Corporation,
Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P., and Weatherford International, Inc. have also filed cross-claims against
O’Brien’s and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean’s Limitation of Liability Act
action and O’Brien’s and NRC have asserted counterclaims against those same parties for identical relief. As provided above, the Company is
unable to estimate the potential exposure, if any, resulting from these actions but believes they are without merit and does not expect this matter
will have a material effect on the Company’s consolidated financial position or its results of operations.
In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things,
claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s
potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a
change in the
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Company’s estimates of that exposure could occur, but the Company does not expect that any such change in estimated costs would have a
material effect on the Company’s consolidated financial position or its results of operations.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of SEACOR serve at the pleasure of the Board of Directors. The name, age and offices held by each of the executive officers of
SEACOR as of December 31, 2011 were as follows:
Name
Age
Position
Charles Fabrikant
67
Oivind Lorentzen
61
Dick Fagerstal
51
Paul Robinson
44
Richard Ryan
57
Matthew Cenac
46
Chairman of the Board and an officer and director of SEACOR and several of its subsidiaries.
Effective September 2010, Mr. Fabrikant resigned as President and Chief Executive Officer of the
Company and was designated Executive Chairman of the Board. Mr. Fabrikant is a Director of
Diamond Offshore Drilling, Inc., a contract oil and gas driller, and Hawker Pacific Airservices,
Limited, an aviation sales product support company. In addition, he is President of Fabrikant
International Corporation, a privately owned corporation engaged in marine investments. Fabrikant
International Corporation may be deemed an affiliate of SEACOR.
Chief Executive Officer since September 2010. From June 1990 to September 2010, Mr. Lorentzen
was President of Northern Navigation America, Inc., an investment management and ship-owning
agency company concentrating in specialized marine transportation and ship finance. Mr. Lorentzen
is also a director of Genessee & Wyoming Inc., an owner of short line and regional freight railroads
and a director of Blue Danube, Inc., an inland marine service provider.
Senior Vice President, Corporate Development and Finance of SEACOR since February 2003. Mr.
Fagerstal served as Treasurer from May 2000 to November 2008. From August 1997 to February
2003, he served as Vice President of Finance. In addition, Mr. Fagerstal is an officer and director of
certain SEACOR subsidiaries.
Senior Vice President, General Counsel and Corporate Secretary of SEACOR since November
2007. From 1999 through June 2007, Mr. Robinson held various positions at Comverse
Technology, Inc., including Chief Operating Officer, Executive Vice President, General Counsel
and Corporate Secretary. In addition, Mr. Robinson is an officer and director of certain SEACOR
subsidiaries.
Senior Vice President of SEACOR since November 2005 and, from September 2005 to November
2005, was Vice President. Mr. Ryan has been Chief Financial Officer since September 2005. From
December 1996, when he joined SEACOR, until June 2002, Mr. Ryan was International Controller
and, from July 2002 until becoming Chief Financial Officer, served as Managing Director of
SEACOR Marine (International) Ltd. In addition, Mr. Ryan is an officer and director of certain
SEACOR subsidiaries.
Vice President and Chief Accounting Officer of SEACOR since September 2005. From June 2003
to August 2005, Mr. Cenac was Corporate Controller of SEACOR. In addition, Mr. Cenac is an
officer and director of certain SEACOR subsidiaries.
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PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market for the Company’s Common Stock
SEACOR’s Common Stock trades on the New York Stock Exchange (“NYSE”) under the trading symbol “CKH.” Set forth in the table
below for the periods presented are the high and low sale prices for SEACOR’s Common Stock.
Fiscal Year Ending December 31, 2012:
First Quarter (through February 17, 2012)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
HIGH
LOW
$ 99.24
$85.88
$113.20
$101.25
$109.50
$ 91.63
$90.74
$91.17
$80.03
$75.04
$ 81.79
$ 92.23
$ 88.09
$116.00
$69.88
$67.01
$68.39
$82.39
As of February 17, 2012, there were 926 holders of record of Common Stock.
SEACOR’s Board of Directors declared a Special Cash Dividend of $15.00 per common share payable to shareholders of record on
December 14, 2010, which was paid on or about December 21, 2010. Any payment of future dividends will be at the discretion of SEACOR’s
Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, current and anticipated capital
requirements, plans for expansion, level of indebtedness and contractual restrictions, including the provisions of the Company’s revolving credit
facility or other then-existing indebtedness. The payment of future cash dividends, if any, would be made only from assets legally available.
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Performance Graph
Set forth in the graph below is a comparison of the cumulative total return that a hypothetical investor would have earned assuming the
investment of $100 over the five-year period commencing on December 31, 2006 in (i) the Common Stock of the Company, (ii) the Standard &
Poor’s 500 Stock Index (“S&P 500”) and (iii) the Simmons Offshore Transportation Services Index, an index of oil service companies published
by Simmons and Company International Limited (the “Simmons Peer Index”).
Company (1)
S&P 500 (1)
Simmons Peer Index ( 2 )
2006
2007
100
100
100
94
105
123
December 31,
2008
2009
64
66
59
77
84
87
2010
2011
117
97
102
103
99
98
(1)
Assumes the reinvestment of dividends.
(2)
Simmons Peer Index is calculated as a simple average percentage in share prices and includes the following companies: Bourbon S.A., Bristow Group Inc., PHI Inc., Tidewater Inc.,
GulfMark Offshore, Inc., Kirby Corporation, Hornbeck Offshore Services, Inc., Solstad Offshore ASA, Farstad Shipping ASA, DOF ASA, Dockwise Ltd., and SEACOR Holdings Inc.
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Issuer Repurchases of Equity Securities
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire Common Stock,
which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During
the years ended December 31, 2011, 2010 and 2009, the Company acquired for treasury 843,400, 1,811,700 and 606,576 shares of Common
Stock, respectively, for an aggregate purchase price of $71.3 million, $137.1 million and $45.9 million, respectively. As of December 31, 2011,
SEACOR had authorization to repurchase $41.8 million of Common Stock. On January 18, 2012, SEACOR’s Board of Directors increased the
repurchase authority to $150.0 million.
Period
Total Number of
Shares
Purchased
10/01/11 – 10/31/11
11/01/11 – 11/30/11
12/01/11 – 12/31/11
—
327,900
515,500
Average Price Paid
Per Share ( 1 )
$
$
$
—
82.33
85.84
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
—
—
—
Maximum Value of
Shares that may Yet
be Purchased under
the Plans or Programs ( 2 )
$
$
$
113,024,228
86,028,513
41,776,640
(1)
Excludes commissions of $42,545 or $0.05 per share.
(2)
Since February 1997, SEACOR’s Board of Directors has authorized the repurchase of Common Stock, certain debt or a combination thereof. From time to time thereafter, and most
recently on January 18, 2012, SEACOR’s Board of Directors increased the authority to repurchase Common Stock.
Sale of Unregistered Equity Securities
In preparing this Annual Report on Form 10-K, the Company discovered that it had inadvertently failed to file with the Securities and
Exchange Commission a registration statement relating to shares of Common Stock issuable under the SEACOR Holdings Inc. 2009 Employee
Stock Purchase Plan (the “2009 ESPP”). Consequently, the Company inadvertently sold unregistered shares to employees: 19,017 shares on
August 31, 2010 at $66.54 per share ($1,265,391); 30,151 shares on February 28, 2011 at $55.46 per share ($1,672,174); and 17,225 shares on
August 31, 2011 at $75.43 per share ($1,299,282). Of these, the Company believes that it is able to rely upon an exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended, with respect to 1,364 shares sold on August 31, 2010, 5,340 shares sold on
February 28, 2011, and 201 shares sold on August 31, 2011. On February 23, 2012, the Company filed a registration statement on Form S-8 to
register future transactions under the 2009 ESPP. The Company has implemented monitoring and reporting procedures to ensure that in the
future the Company timely meets its registration obligations with respect to these and other employee benefit plans.
The failure to file the registration statement noted above was inadvertent, and the Company has always treated the shares issued under the
2009 ESPP as issued and outstanding for financial reporting purposes. Consequently, the unregistered transactions do not represent any
additional dilution. The Company believes it has always provided the employee-participants in the plan with the same information they would
have received had the registration statement been filed. Nonetheless, the Company may be subject to civil and other penalties by regulatory
authorities as a result of the failure to register. Certain purchasers of shares in the unregistered transactions may have the right to rescind their
purchases for an amount equal to the purchase price for the shares (or if the shares have been disposed of, to receive damages with respect to any
loss on such disposition) plus interest from the date of purchase.
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ITEM 6.
SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth, for the periods indicated, selected historical consolidated financial data for the Company (in thousands,
except per share data). Such financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” included in Parts II and IV, respectively, of
this Annual Report on Form 10-K.
Operating Revenues:
Aviation Services
Commodity Trading and Logistics (1 )
Other ( 2 )
Eliminations and Corporate
Operating Income
Other Income (Expenses):
Net interest expense
Other ( 3 )
Net Income attributable to SEACOR Holdings Inc.
Earnings Per Common Share of SEACOR Holdings Inc.:
Basic
Diluted
Statement of Cash Flows Data – provided by (used in):
Operating activities
Investing activities
Financing activities
Effects of exchange rate changes on cash and cash equivalents
Capital Expenditures
Balance Sheet Data (at period end):
Cash and cash equivalents, restricted cash, marketable securities and Title XI and
construction reserve funds
Total assets
Long-term debt and capital lease obligations, less current portion
Total SEACOR Holdings Inc. stockholders’ equity
(1)
Years Ended December 31,
2009
2008
2011
2010
$ 376,788
258,148
187,657
93,136
211,636
955,688
69,928
(11,039)
$2,141,942
$ 515,856
235,366
161,697
76,163
874,393
741,896
72,835
(28,838)
$2,649,368
$ 562,291
235,667
155,098
92,866
145,767
472,575
64,354
(17,280)
$1,711,338
$ 708,728
248,627
144,022
114,028
168,030
208,264
72,881
(8,624)
$1,655,956
$ 692,418
215,039
121,248
116,037
156,826
9,600
50,032
(1,970)
$1,359,230
$ 123,334
$ 408,371
$ 231,827
$ 342,689
$ 347,775
$ (27,489)
(42,451)
$ (69,940)
$ (35,068)
176
$ (34,892)
$ (54,577)
37,764
$ (16,813)
$ (40,028)
15,265
$ (24,763)
$ (11,813)
7,860
$ (3,953)
$
41,056
$ 244,724
$ 143,810
$ 218,543
$ 236,819
$
1.94
1.91
$
$
$
$
11.43
11.25
10.46
9.25
10.06
9.04
$ 206,587
(331,956)
220,983
1,959
(332,312)
$ 399,417
19,228
(506,511)
(8,010)
(250,626)
$ 297,618
(101,700)
(6,327)
871
(180,024)
$ 291,624
(246,424)
(298,460)
(8,603)
(428,478)
$ 386,901
(109,019)
(247,240)
697
(537,608)
$ 815,754
3,928,134
998,518
1,789,607
$ 853,973
3,760,389
702,920
1,787,237
$ 857,807
3,723,619
755,328
1,957,262
$ 655,803
3,459,654
903,374
1,630,150
$1,001,721
3,566,445
904,595
1,641,940
Commodity Trading and Logistics commenced operations in March 2007.
(2)
Other primarily includes the operations of Harbor and Offshore Towing Services.
(3)
Other principally includes gains and losses from debt extinguishment, marketable security, derivative and foreign currency transactions.
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7.21
6.57
2007
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FORWARD-LOOKING STATEMENTS
Management’s Discussion and Analysis of Financial Condition and Results of Operations below presents the Company’s operating results
for each of the three years in the period ended December 31, 2011, and its financial condition as of December 31, 2011. Except for the historical
information contained herein, this Annual Report on Form 10-K and other written and oral statements that the Company makes from time to
time contain forward-looking statements, which involve substantial known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. The Company has tried, wherever possible, to identify such statements by using words
such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions in connection
with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are those
discussed in “Risks, Uncertainties and Other Factors That May Affect Future Results” in Item 1A of this Annual Report on Form 10-K. In
addition, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in connection
with the information presented in the Company’s consolidated financial statements and the related notes to its consolidated financial statements
included in Part IV of this Annual Report on Form 10-K.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
SEACOR and its subsidiaries are in the business of owning, operating, investing in and marketing equipment, primarily in the offshore oil
and gas, industrial aviation and marine transportation industries. The Company conducts its activities in six primary business segments:
Offshore Marine Services operates a diversified fleet of offshore support vessels primarily servicing offshore oil and gas exploration,
development and production facilities worldwide. On December 22, 2011, Offshore Marine Services acquired a controlling interest in a
European based operator of a fleet of wind farm utility vessels operating in the main offshore wind markets of Europe.
Aviation Services operates and contract-leases helicopters that provide transportation services supporting offshore oil and gas activities
primarily in the United States, air medical services to hospitals in the United States, and international contract-leasing activities.
Inland River Services is primarily engaged in dry and liquid cargo transportation on the U.S. Inland River Waterways and the Gulf
Intracoastal Waterways for a range of agricultural and industrial products.
Marine Transportation Services operates a fleet of U.S.-flag product tankers carrying petroleum, crude oil and chemical products in the
U.S. coastwise trade and a fleet of Roll-On/Roll-Off vessels providing cargo transportation services to and from ports in Florida, the Bahamas
and the Caribbean.
Environmental Services is primarily engaged in the provision of emergency preparedness and response services to oil, chemical,
industrial and marine transportation clients in the United States and abroad.
Commodity Trading and Logistics is an integrated business involved in the purchase, storage, transportation and sale of agricultural and
energy commodities.
Other primarily includes Harbor and Offshore Towing Services, various other investments in joint ventures, primarily providing industrial
air services, and lending and leasing activities.
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The Company’s business segments, with the exception of Environmental Services and Commodity Trading and Logistics, are “asset
related” and highly capital-intensive. Demand for the Company’s assets is cyclical in varying degrees due to fluctuations in the activity levels in
the industries serviced by those assets, as well as availability of supply.
To manage capital successfully over time, the Company continually assesses its asset portfolio and pursues opportunities to realize value
from its assets by shifting their operation to other markets or trading them when circumstances warrant. The Company actively leases-out and
leases-in, and buys and sells equipment in the ordinary course of its business. It also designs, orders, builds, upgrades, operates or re-sells newly
constructed equipment. The Company typically pursues a strategy of shedding older assets while adjusting its asset mix. The Company also
leases assets to other operators and sells assets to financial lessors and leases them back for varying periods of time. The Company believes that
maintaining significant liquidity is an important factor that will enable it to take advantage of opportunities as they arise.
In recent years, the Company has sought to create balance in its businesses and broaden its asset base by investing outside the oil and gas
industry in barges, ships tugs and wind farm utility vessels, and by looking for opportunities to engage in logistics support for movement of
agricultural and energy commodities.
The Company is exploring opportunities to extend its industrial aviation activities through investments in sales, marketing and distribution
of aircraft and specialized parts and services, maintenance and repair facilities and fixed base operations. In addition, the Company continues to
look to expand in the Chinese and Indian markets.
The Company believes that demand for its barges, tankers, tugs and wind farm utility vessels is, in part, linked to different factors than
those that drive demand for offshore oil and gas exploration and development. In addition, for barges and tankers, contracts can sometimes be
secured with longer terms than those typically available for offshore marine and helicopter services. The expectation is that over time this
strategy of diversification will provide better returns on capital than could be achieved by restricting investment to one specific, highly cyclical,
asset class such as vessels supporting offshore oil and gas activity. The Company believes this strategy will afford more opportunities to use
capital efficiently, create greater stability of earnings and allow improved margins due to operational synergies that in turn, should yield a lower
cost of capital, more sustainable cash flows and increased profitability.
Deepwater Horizon Oil Spill Response
The Company’s operating results for the years ended December 31, 2011 and 2010, were impacted by oil spill response activities relating
to the BP Macondo well incident in the U.S. Gulf of Mexico following the sinking of the semi-submersible drilling rig Deepwater Horizon in
April 2010 (the “Oil Spill Response”). The impact was material to operating income recorded in both years. In 2010, at the height of the Oil Spill
Response, four of the Company’s business segments were actively providing support. Environmental Services provided (i) equipment and people
to support clean-up activities on-shore, (ii) professional assistance, consulting services and software systems in support of incident management
activities at various strategic locations, and (iii) assistance in the provision of manpower for clean-up operations throughout the region. Offshore
Marine Services provided (i) vessels for a variety of functions including vessel decontamination, skimming, lightering, offshore traffic control
and accommodation, and (ii) technical and video equipment on vessels engaged in the response to allow for instant tracking of assets and
surveillance of operations. Aviation Services provided (i) helicopters for air support to U.S. Coast Guard observers undertaking oil spotting and
assessment missions, (ii) transportation for various other officials requiring overflights to assess the response and recovery efforts, and (iii) a
flight tracking system to monitor the movement of all marine and aviation assets involved in the response. Harbor and Offshore Towing Services
provided tugs engaged in the decontamination of vessels transiting the region. Oil Spill Response activity has continued to significantly diminish
since December 31, 2010. During 2011, the Company’s involvement primarily consisted of limited professional services provided by O’Brien’s
Response Management Inc., which is part of the Company’s Environmental Services business segment.
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As an active participant in the Oil Spill Response, the Company has been named in individual and class action litigations involving
environmental damage, business and personal injury claims that may result in financial exposure. For additional information, see “Item 3. Legal
Proceedings” included in Part I of this Annual Report on Form 10-K.
In reaction to the Deepwater Horizon /BP Macondo well incident, the U.S. Department of the Interior issued an order on May 28, 2010
imposing a six month moratorium on all offshore deepwater drilling projects. A preliminary injunction was issued on June 22, 2010 blocking
enforcement of the moratorium; however, the U.S. Department of Interior issued a new moratorium on July 12, 2010 which was lifted on
October 12, 2010. The U.S. Department of Interior has also implemented additional safety and certification requirements for drilling activities,
imposed additional requirements for the approval of development and production activities, and delayed the approval of applications to drill in
both deepwater and shallow-water areas. The Company’s results, in particular those of its Offshore Marine Services and Aviation Services
segments, have been adversely impacted as a consequence of reduced drilling activities in the U.S. Gulf of Mexico. For additional information,
see “Item 1A. Risk Factors” included in Part I of this Annual Report on Form 10-K.
Consolidated Results of Operations
Consolidated financial data for segment and geographic areas is reported in Part IV “Note 16. Major Customers and Segment Information”
of this Annual Report on Form 10-K.
The market for offshore oil and gas drilling has historically been cyclical. Demand tends to be linked to the price of oil and gas and those
prices tend to fluctuate based on many factors, including global economic activity and levels of reserves. Price levels for oil and gas can in
themselves influence demand. In addition to the price of oil and gas, the availability of acreage, local tax incentives or disincentives, and
requirements for maintaining interests in leases affect activity in the oil and gas industry. The cyclicality of the market is further exacerbated by
the tendency in the industry to order capital assets as demand grows, often resulting in new capacity becoming available just as demand for oil
and gas is peaking and activity is about to decline.
Offshore market conditions continued to be weak during 2011. For the majority of 2011, activity in the U.S. Gulf of Mexico market
continued to be significantly impacted by the aftermath of the Deepwater Horizon incident in April 2010. Revised procedures for obtaining
drilling permits issued by the Bureau of Safety and Environmental Enforcement (“BSEE”), (formerly the Bureau of Ocean Energy Management)
resulted in limited demand throughout the year. Although activity levels improved during the final quarter when Offshore Marine Services’
vessels and those of its competitors began returning to work, average day rates are below 2007-2008 levels. Margins are further pressured by
escalating operating costs, in particular the market for qualified and experienced crew has become more competitive resulting in higher wage
rates. Operators are struggling to man reactivated vessels and to meet customer requirements for higher qualified personnel. The Company
expects to see a continuation of the upward trends in activity levels and wage pressures during 2012. In international markets, the delivery of
newly built vessels during 2011 has created a situation of oversupply in the North Sea, Asia, Middle East and West Africa regions, which is
expected to continue during 2012.
Over the last several years, Offshore Marine Services has disposed of its old generation equipment while taking delivery of new vessels
specifically designed to meet the changing requirements of the market. Since December 31, 2005, the average age of the fleet, excluding standby
safety and wind farm utility vessels, has been reduced from 16 years to 11 years as of December 31, 2011. Offshore Marine Services enters 2012
with an increased order book for new equipment and believes its diverse fleet and broad geographical distribution of vessels will assist in
weathering the effects of an industry downturn. The Company’s strong financial position should enable Offshore Marine Services to capitalize
on opportunities as they develop for purchasing, mobilizing or upgrading vessels to meet changing market conditions.
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As of December 31, 2011, in addition to its existing fleet, Offshore Marine Services had new construction projects in progress including
one U.S.-flag, DP-2 AHTS vessel scheduled for delivery in the second quarter of 2012; two foreign-flag, DP-3 catamarans scheduled for
delivery in the first and third quarters of 2013; two U.S.-flag, DP-2 FSVs scheduled for delivery between the first and third quarters of 2014; two
foreign-flag supply vessels scheduled for delivery between the first and second quarters of 2012 and one foreign-flag wind farm utility vessel
scheduled for delivery in the second quarter of 2012. Subsequent to December 31, 2011 Offshore Marine Services placed a firm order for the
construction of four U.S.-flag, DP-2 supply vessels for delivery between the third quarter of 2013 and first quarter of 2015.
On December 22, 2011, Offshore Marine Services acquired a controlling interest in a business that owns and operates vessels primarily
used to move personnel and supplies to offshore wind turbines. The Company believes this investment represents an opportunity to diversify its
portfolio by providing marine services to non-oil and gas related energy development while leveraging off its existing shore-based infrastructure
in Europe, which currently supports standby safety operations in the North Sea.
Subsequent to December 31, 2011, the Company reached an agreement to acquire 18 lift boats from Superior Energy Services, LLC and
affiliates for $134.0 million plus a to be determined amount for working capital. The agreement is subject to certain conditions, including
regulatory approval, and is expected to be completed prior to the end of the second quarter of 2012.
The number and type of vessels operated, their rates per day worked and their utilization levels are the key determinants of Offshore
Marine Services’ operating results and cash flows. Unless a vessel is cold-stacked (removed from operational service), there is little reduction in
daily running costs and, consequently, operating margins are most sensitive to changes in rates per day worked and utilization.
The aggregate cost of Offshore Marine Services’ operations depends primarily on the size and asset mix of the fleet. Offshore Marine
Services’ operating costs and expenses are grouped into the following categories:
•
personnel (primarily wages, benefits, payroll taxes, savings plans and travel for marine personnel);
•
repairs and maintenance (primarily routine repairs and maintenance and main engine overhauls which are performed in accordance
with planned maintenance programs);
•
drydocking (primarily the cost of regulatory drydockings performed in accordance with applicable regulations);
•
insurance and loss reserves (primarily the cost of Hull and Machinery and Protection and Indemnity insurance premiums and loss
deductibles);
•
fuel, lubes and supplies;
•
leased-in equipment (includes the cost of leasing vessels from lessors under bareboat charter arrangements and leasing equipment
employed on vessels);
•
brokered vessel activity (the cost of chartering-in third party vessels under time charter arrangements to fulfill a customer
requirement that cannot be filled by a vessel in the Company’s fleet); and
•
other (communication costs, expenses incurred in mobilizing vessels between geographic regions, third party ship management fees,
freight expenses, customs and importation duties, and other).
The Company expenses drydocking, engine overhaul and vessel mobilization costs as incurred. If a disproportionate number of
drydockings, overhauls or mobilizations are undertaken in a particular fiscal year or quarter, operating expenses may vary significantly when
compared with the prior year or prior quarter.
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Table of Contents
Results of Operations
2011
Amount
$ ’000
Operating Revenues:
United States, primarily U.S Gulf of Mexico
Africa, primarily West Africa
Middle East
Brazil, Mexico, Central and South America
Europe, primarily North Sea
Asia
Costs and Expenses:
Operating:
Personnel
Repairs and maintenance
Drydocking
Insurance and loss reserves
Fuel, lubes and supplies
Leased-in equipment
Brokered vessel activity
Other
Administrative and general
Depreciation and amortization
Gains on Asset Dispositions and Impairments, Net
Operating Income
Other Income (Expense):
Derivative losses, net
Foreign currency gains (losses), net
Other, net
Equity in Earnings of 50% or Less Owned Companies
Segment Profit
2010
Amount
Percent
$ ’000
%
Amount
$ ’000
2009
Percent
%
117,912
64,619
46,590
57,659
74,663
15,345
376,788
31
17
13
15
20
4
100
242,874
78,363
51,408
49,694
66,861
26,656
515,856
47
15
10
10
13
5
100
207,455
109,428
78,205
68,244
66,956
32,003
562,291
37
19
14
12
12
6
100
137,529
38,167
13,806
12,972
24,825
18,114
3,262
20,528
269,203
47,201
48,477
364,881
14,661
26,568
36
10
4
3
7
5
1
5
71
13
13
97
4
7
152,660
46,698
20,318
14,587
24,252
15,609
12,218
23,245
309,587
50,795
51,760
412,142
29,474
133,188
30
9
4
3
4
3
2
5
60
10
10
80
6
26
147,717
51,215
13,615
15,761
26,084
12,470
26,503
16,270
309,635
47,031
54,869
411,535
22,490
173,246
26
9
2
3
5
2
5
3
55
8
10
73
4
31
—
(1)
—
3
9
—
1,622
1
9,306
144,117
—
—
—
2
28
(175)
2,451
182
9,867
185,571
—
—
—
2
33
—
(3,102)
278
9,189
32,933
59
Percent
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Table of Contents
Operating Revenues by Type. The table below sets forth, for the years indicated, operating revenues earned by type.
Operating Revenues:
Time charter:
United States, primarily U.S. Gulf of Mexico
Middle East
Asia
Total time charter
Bareboat charter
Brokered vessel activity
Other marine services
60
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
109,005
59,465
36,608
51,039
74,501
14,354
344,972
1,050
4,219
26,547
376,788
223,363
63,273
40,353
41,904
66,784
19,461
455,138
6,966
16,207
37,545
515,856
199,581
93,471
54,447
49,724
66,683
31,112
495,018
7,829
30,753
28,691
562,291
29
16
10
14
20
3
92
—
1
7
100
43
12
8
8
13
4
88
2
3
7
100
35
17
10
9
12
5
88
1
6
5
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Time Charter Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for each
group of Offshore Marine Services’ vessels operating under time charters for the periods indicated. The rate per day worked is the ratio of total
time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total calendar days
available for work. Available days represents the total calendar days during which owned and chartered-in vessels are operated by the Company.
Rates Per Day Worked:
Crew
Mini-supply
Standby safety
Supply
Towing supply
Specialty
Overall Average Rates Per Day Worked
Utilization:
Crew
Mini-supply
Standby safety
Supply
Towing supply
Specialty
Overall Fleet Utilization
Available Days:
Crew
Mini-supply
Standby Safety
Supply
Towing supply
Specialty
Overall Fleet Available Days
2011
2010
2009
Q4 2011
Q4 2010
$28,874
6,712
7,670
9,159
14,632
9,368
11,753
11,234
$36,375
6,580
8,527
8,394
14,567
11,092
6,987
12,499
$37,904
7,366
6,422
8,457
15,271
12,002
13,185
12,223
$27,187
7,166
7,948
9,254
15,755
8,497
17,845
12,187
$27,689
6,541
6,276
8,806
14,087
10,904
6,269
10,646
52%
72%
80%
88%
73%
48%
64%
72%
6,205
14,708
2,795
9,288
6,685
1,771
1,265
42,717
72%
72%
65%
89%
77%
75%
75%
75%
6,755
17,897
3,933
8,982
6,926
2,612
1,273
48,378
63%
67%
60%
90%
77%
90%
87%
73%
6,474
23,391
4,755
8,760
7,202
3,346
1,588
55,516
70%
78%
96%
90%
82%
44%
70%
80%
1,564
3,418
644
2,355
1,798
368
276
10,423
53%
67%
51%
89%
65%
68%
86%
69%
1,641
4,327
930
2,300
1,739
552
306
11,795
2011 compared with 2010
Operating Revenues. Operating revenues were $139.1 million lower for the year ended December 31, 2011 compared with the year ended
December 31, 2010.
Time charter revenues were $110.2 million lower. Overall fleet utilization was 72% compared with 75%. The number of days available for
charter was 42,717 compared with 48,378, a reduction of 5,661 days or 12%, due to net fleet dispositions, including the return of one and seven
vessels to leasing companies in 2011 and 2010, respectively. Overall average day rates were $11,234 per day compared with $12,499 per day, a
decrease
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Table of Contents
of $1,265 per day or 10%. In overall terms, time charter revenues decreased by $50.3 million due to reduced fleet utilization, $27.1 million due
to lower average day rates, $26.1 million due to net fleet dispositions, and $9.1 million due to vessel mobilizations and other changes in fleet
mix. In overall terms, the impact of favorable changes in currency exchange rates increased time charter revenues by $2.4 million.
In the U.S. Gulf of Mexico, time charter revenues were $114.4 million lower primarily due to softer market conditions attributable to a
slowdown in the issuance of drilling permits by the BSEE in the aftermath of the Deepwater Horizon oil spill. During 2010, Offshore Marine
Services had as many as 22 vessels supporting the Oil Spill Response activities, which contributed $90.3 million of time charter revenues. In
overall terms, time charter revenues decreased by $43.5 million due to reduced fleet utilization, $26.2 million due to lower average day rates,
$28.7 million due to vessel mobilizations, and $16.0 million due to net fleet dispositions and other changes in fleet mix. As of December 31,
2011, the Company had four vessels cold-stacked in this region compared with 13 as of December 31, 2010.
In Africa, time charter revenues were $3.8 million lower. Time charter revenues decreased by $7.1 million due to net fleet dispositions,
$4.7 million due to out-of-service time for one vessel undergoing conversion to a safety standby configuration, and $6.1 million due to lower
average day rates and decreased utilization attributable to softer market conditions. Vessels that mobilized into the region contributed time
charter revenues of $14.1 million.
In the Middle East, time charter revenues were $3.7 million lower. Net fleet dispositions and vessel mobilizations to other geographic
regions reduced time charter revenues by $4.4 million. Higher average day rates and improved utilization increased time charter revenues by
$0.7 million.
In Brazil, Mexico, Central and South America, time charter revenues were $9.1 million higher. Vessels that mobilized into the region,
including those chartered in from third parties, contributed time charter revenues of $13.4 million and higher average day rates increased time
charter revenues by $3.2 million. Fleet dispositions and more off-hire time attributable to softer market conditions reduced time charter revenues
by $4.1 million and $3.4 million, respectively.
In Europe, time charter revenues were $7.7 million higher. The commencement of a new charter for a vessel, which mobilized into the
region contributed additional time charter revenues of $4.1 million. Higher average day rates and a strengthening in the pound sterling against
the U.S. dollar combined to further increase time charter revenues by $5.1 million. Additional off-hire time, primarily attributable to routine
maintenance and repairs, and fleet dispositions reduced time charter revenues by $1.3 million and $0.2 million, respectively.
In Asia, time charter revenues were $5.1 million lower, of which $3.5 million due to reduced fleet utilization and lower average day rates
and $1.6 million was due to fleet dispositions, vessel mobilizations and other changes in fleet mix.
Revenues from brokered vessel activity were $12.0 million lower due to reduced activity in the Middle East and West Africa. Other marine
services revenues were $11.0 million lower primarily due to the conclusion of services provided in connection with the Oil Spill Response
during 2010.
Operating Expenses. Operating expenses were $40.4 million lower for the year ended December 31, 2011 compared with the year ended
December 31, 2010. Operating expenses were $11.9 million lower due to net fleet dispositions, $9.0 million lower due to reduced brokered
vessel activity in the Middle East and West Africa, and $7.4 million lower as a result of services provided in connection with the Oil Spill
Response during 2010. In addition, personnel costs in 2010 included a $7.8 million expense for the Company’s share of an additional funding
deficit in the United Kingdom Merchant Navy Officers’ Pension Fund and $3.3 million expense for the settlement of litigation. Drydocking
expenses decreased by $6.5 million primarily due to a reduction in drydocking activity in West Africa. Leased-in equipment expenses were $2.5
million higher primarily due to the charter-in of two vessels operating in Brazil, Mexico, Central and South America, partially offset by the
impact of seven vessels being returned to their owners during 2010.
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Table of Contents
Administrative and general. Administrative and general expenses were $3.6 million lower for the year ended December 31, 2011
compared with the year ended December 31, 2010. The decrease was primarily due to reduced management compensation and benefits and
lower legal and professional fees.
Gains on Asset Dispositions and Impairments, Net. During 2011, the Company sold eleven offshore support vessels and other equipment
for net proceeds of $59.7 million and gains of $26.1 million, of which $13.8 million was recognized currently and $12.3 million was deferred. In
addition, the company recognized previously deferred gains of $0.9 million. During 2010, the Company sold eight offshore support vessels and
other equipment and received insurance proceeds related to the nationalization of one of its offshore support vessels and the total constructive
loss of another offshore support vessel under construction. The Company received net proceeds of $144.0 million on the disposition of these
assets, including the insurance proceeds, and had gains of $32.6 million, of which $24.0 million was recognized currently and $8.6 million was
deferred. In addition, the company recognized previously deferred gains of $5.5 million in 2010.
Operating Income. Excluding the impact of gains on asset dispositions and impairments and the impact of brokered vessel activity,
operating income as a percentage of operating revenues was 3% in 2011 compared with 20% in 2010. The decrease was primarily attributable to
the reduction in operating revenues noted above.
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. During the year ended December 31, 2011, Offshore Marine Services’
Mexican joint venture executed a business reorganization plan and issued an additional equity interest to an unrelated third party. Subsequent to
the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax. This gain was offset
by lower results from another joint venture due to its vessel being cold-stacked at the end of 2010.
December 31, 2009.
Time charter revenues were $39.9 million lower. Overall fleet utilization was 75% compared with 73%. The number of days available for
charter was 48,378 compared with 55,516, a reduction of 7,138 days or 13%, due to net fleet dispositions and termination of leases, which
resulted in returning to lessors seven and eleven vessels operating in the U.S Gulf of Mexico in 2010 and 2009, respectively. Overall average day
rates were $12,499 per day compared with $12,223 per day, an increase of $276 per day or 2%. Net fleet dispositions reduced time charter
revenues by $37.3 million while changes in utilization, average day rates, the impact of vessels mobilizing between geographic regions and other
changes in fleet mix combined to reduce time charter revenues by $1.8 million. In overall terms, the impact of unfavorable changes in currency
exchange rates decreased time charter revenues by $0.8 million.
In the U.S. Gulf of Mexico, time charter revenues were $23.8 million higher primarily as a result of demand for vessels in support of the
Oil Spill Response. During 2010, Offshore Marine Services had as many as 22 vessels supporting the Oil Spill Response; however as of
December 31, 2010, all vessels had been released. Charters in support of the Oil Spill Response contributed $90.3 million of time charter
revenues in 2010. In overall terms, time charter revenues increased by $19.0 million due to improved fleet utilization and higher average day
rates, decreased by $12.0 million due to net fleet dispositions and the impact of vessels mobilizing between geographic regions and increased
$16.8 million due to changes in fleet mix. As of December 31, 2010, the Company had 13 vessels cold-stacked in this region compared with 19
as of December 31, 2009.
In Africa, time charter revenues were $30.2 million lower. Net fleet dispositions, vessels that mobilized to other geographic regions and
changes in fleet mix combined to reduced time charter revenues by $15.9 million. Lower average day rates and more off-hire time due to softer
market conditions reduced time charter revenues by $14.3 million.
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In the Middle East, time charter revenues were $14.1 million lower, of which $3.5 million was due to net fleet dispositions, $3.9 million
was due to out-of-service time for one vessel undergoing conversion to a safety standby configuration, and $8.9 million was due to lower
average day rates and more off-hire time attributable to softer market conditions. Vessels that mobilized into the region and changes in fleet mix
contributed time charter revenues of $2.2 million.
In Brazil, Mexico, Central and South America, time charter revenues were $7.8 million lower. Net fleet dispositions reduced time charter
revenues by $9.8 million while vessels that mobilized into the region and changes in fleet mix contributed time charter revenues of $3.1 million.
More off-hire time attributable to softer market conditions, partially offset by increases in average day rates, reduced time charter revenues by
$1.1 million.
In Europe, time charter revenues were $0.1 million higher. The commencement of a new charter for a vessel mobilized into the region
contributed additional time charter revenues of $1.7 million. Additional off-hire time, primarily due to increased drydocking activity, lower
average day rates and a weakening in the pound sterling against the U.S. dollar reduced time charter revenues by $1.6 million.
In Asia, time charter revenues were $11.7 million lower, of which $9.8 million was attributable to fleet dispositions. Reduced fleet
utilization and lower average day rates combined to reduce time charter revenues by $2.4 million. Vessels that mobilized into the region
contributed time charter revenues of $0.5 million.
Revenues from brokered vessel activity were $14.5 million lower primarily due to reduced activity in the Middle East. Other marine
services revenues were $8.9 million higher primarily due to services provided in connection with the Oil Spill Response.
Operating Expenses. Operating expenses were $309.6 million for the years ended December 31, 2010 and 2009. Operating expenses were
$17.3 million lower due to net fleet dispositions and $14.3 million lower due to reduced brokered vessel activity in the Middle East. These
reductions in operating expenses were primarily offset by higher personnel costs, higher drydocking expense, and other costs associated with the
Oil Spill Response.
Personnel costs were $4.9 million higher in 2010 and included a $7.8 million expense for the Company’s share of a funding deficit of the
United Kingdom Merchant Navy Officers’ Pension Fund and a $3.3 million expense for the settlement of litigation. Repair and maintenance
expenses were $4.5 million lower primarily due to net fleet dispositions and lower expenses related to the Company’s Anchor Handling Towing
Supply vessels operating in the U.S. Gulf of Mexico. Drydocking expenses were $6.7 million higher due to increased activity, particularly in the
North Sea. Other operating expenses were $7.0 million higher primarily due to services provided in connection with the Oil Spill Response.
Administrative and general. Administrative and general expenses were $3.8 million higher for the year ended December 31, 2010
compared with the year ended December 31, 2009. The increase was primarily due to higher management compensation and benefits and the
reversal in 2009 of a doubtful debt reserve following collection.
Gains on Asset Dispositions and Impairments, Net. During 2010, the Company sold eight offshore support vessels and other equipment
and received insurance proceeds related to the nationalization of one of its offshore support vessels and the total constructive loss of another
offshore support vessel under construction. The Company received net proceeds of $144.0 million on the disposition of these assets, including
the insurance proceeds, and had gains of $32.6 million, of which $24.0 million was recognized currently and $8.6 million was deferred. In
addition, the company recognized previously deferred gains of $5.5 million. During 2009, the Company sold 19 offshore support vessels and
other equipment for net proceeds of $56.3 million and gains of $23.0 million, of which $19.6 million was recognized currently and $3.4 million
was deferred. In addition, the Company recognized previously deferred gains of $2.9 million.
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Table of Contents
Operating Income. Excluding the impact of gains on asset dispositions and impairments and the impact of brokered vessel activity,
operating income as a percentage of operating revenues was 20% in 2010 compared with 28% in 2009. The decrease was primarily attributable
to the reduction in operating revenues noted above.
Aviation Services
A significant portion of Aviation Services’ operations involves transportation services provided to offshore oil and gas customers. The
offshore oil and gas market is highly cyclical with demand linked to the price of oil and gas, which tends to fluctuate depending on many factors,
including global economic activity and levels of inventory. In addition to the price of oil and gas, the availability of acreage and local tax
incentives or disincentives and requirements for maintaining interests in leases affect activity levels in the oil and gas industry. Price levels for
oil and gas by themselves can cause additional fluctuations by inducing changes in consumer behavior.
During the year ended December 31, 2010, the market for Aviation Services’ assets in the U.S. Gulf of Mexico was disrupted by events
related to the sinking of the Deepwater Horizon drilling rig. During 2011, the process of issuing permits to drill remained slow and continued to
have a negative impact on demand for helicopter services in the U.S. Gulf of Mexico. Aviation Services believes the slowdown will not
significantly impact its future results in the U.S. Gulf of Mexico because its activities are mainly focused on longer-term production,
maintenance and inspection work rather than on short-term exploration and development projects. For the last five years, Aviation Services has
provided transportation services to government inspectors of offshore drilling rigs and this contract was recently renewed and is expected to run
through 2016. As of December 31, 2011, 19 of Aviation Services’ helicopters were operating under this contract with customer options to
increase the number up to 33 helicopters.
Prior to the Deepwater Horizon incident, Aviation Services had begun to deploy helicopters in international markets, frequently under
contract-lease arrangements to third parties. The majority of these helicopters are supporting oil and gas activities in regions of rapidly
expanding activity, such as Brazil, India and Indonesia. Aviation Services also has equipment working in the North Sea and Mexico. Contractleasing affords Aviation Services the opportunity to access new markets without heavy initial infrastructure investment and generally without
ongoing operating risk. Profits derived from contract-leasing activities depend on Aviation Services’ cost of operations, if applicable, cost of
capital, acquisition costs of assets, contract policy and reputation. As of December 31, 2011, Aviation Services had 48 helicopters located in
foreign jurisdictions compared with 15 helicopters as of December 31, 2006.
In the United States, consistent with its diversification strategy, Aviation Services deploys a number of helicopters in support of other
industries and activities, including air medical services and search and rescue services in the U.S Gulf of Mexico, which are being developed on
a subscription basis.
The aggregate cost of Aviation Services’ operations depends primarily on the size and asset mix of the fleet. Aviation Services’ operating
costs and expenses are grouped into the following categories:
•
personnel (includes wages, benefits, payroll taxes, savings plans, subsistence and travel);
•
repairs and maintenance (primarily routine activities as well as helicopter refurbishments and engine and major component overhauls
that are performed in accordance with planned maintenance programs);
•
insurance and loss reserves (the cost of hull and liability insurance premiums and loss deductibles);
•
fuel;
•
leased-in equipment (includes the cost of leasing helicopters and equipment); and
•
other (primarily base expenses, property, sales and use taxes, communication costs, freight expenses, and other).
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Aviation Services engages a number of third-party vendors to maintain the engines and certain components on some of its helicopter
models under programs known as “power-by-hour” maintenance contracts. These programs require Aviation Services to pay for the maintenance
service ratably over the contract period, typically based on actual flight hours. Power-by-hour providers generally bill monthly based on hours
flown in the prior month, the costs being expensed as incurred. In the event Aviation Services places a helicopter in a program after a
maintenance period has begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event.
This buy-in charge is normally recorded as a prepaid expense and amortized as an operating expense over the remaining power-by-hour contract
period. If a helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, Aviation Services
may be able to recover part of the Company’s payments to the power-by-hour provider, in which case a reduction to operating expense is
recorded when the refund is received.
Aviation Services expenses all repair costs as incurred, which may result in operating expenses varying substantially when compared with
a prior year or prior quarter if a disproportionate number of refurbishments or overhauls are undertaken. This variation can be exacerbated by the
timing of entering or exiting third-party power-by-hour programs.
For helicopters that are contract-leased to third parties under arrangements whereby the customer assumes operational responsibility,
Aviation Services often provides maintenance and parts support but generally does not incur any other material operating costs. In most
instances, contract-leases require clients to procure adequate insurance but Aviation Services purchases contingent hull and liability coverage to
mitigate the risk of a client’s coverage failing to respond. In some instances, Aviation Services provides crews and other services to support its
contract-lease customers.
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Operating Revenues:
United States
Foreign
Costs and Expenses:
Operating:
Personnel
Fuel
Leased-in equipment
Other
Operating Income
Derivative gains (losses), net
Other, net
Equity in Earnings (Losses) of 50% or Less Owned Companies
Segment Profit
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
185,677
72,471
258,148
72
28
100
178,656
56,710
235,366
76
24
100
201,344
34,323
235,667
85
15
100
61,527
49,756
8,479
20,131
2,003
20,811
162,707
31,893
42,612
237,212
15,172
36,108
24
19
3
8
1
8
63
12
17
92
6
14
58,835
44,195
9,114
15,083
2,052
17,954
147,233
25,798
43,351
216,382
764
19,748
25
19
4
6
1
8
63
11
18
92
—
8
63,195
40,523
9,867
16,812
2,811
14,747
147,955
21,396
37,358
206,709
316
29,274
27
18
4
7
1
6
63
9
16
88
—
12
(1,326)
516
9
82
35,389
67
—
—
—
—
14
(118)
(1,511)
50
(137)
18,032
—
—
—
—
8
266
1,439
—
(487)
30,492
—
1
—
—
13
Table of Contents
Operating Revenues by Service Line. The following tables set forth, for the years indicated, the amount of operating revenues by service
line.
2011
Amount
$ ’000
Operating Revenues:
U.S. Gulf of Mexico, primarily from oil and gas activities
Alaska, primarily from oil and gas activities
Contract-leasing
Air Medical Services
Flightseeing
FBO
Intersegment Eliminations
119,149
23,602
72,700
25,836
6,861
10,406
(406)
258,148
2010
Percent
%
46
9
28
10
3
4
—
100
Amount
$ ’000
112,458
28,188
57,538
22,208
6,437
8,912
(375)
235,366
2009
Percent
%
48
12
24
9
3
4
—
100
Amount
$ ’000
121,335
25,183
35,441
37,244
6,957
10,729
(1,222)
235,667
Percent
%
51
11
15
16
3
5
(1)
100
Operating Revenues. Operating revenues were $22.8 million higher for the year ended December 31, 2011 compared with the year ended
December 31, 2010. Operating revenues in the U.S. Gulf of Mexico were $6.7 million higher primarily due to a $7.3 million increase from
search and rescue activities which began in late 2010 and a $9.9 million increase from higher oil and gas related activities, including fuel billings
as a result of higher prices. The increases were partially offset by a $10.5 million decrease in operating revenues for activity in support of the Oil
Spill Response. Operating revenues in Alaska were $4.2 million lower primarily due to the expiration of a contract with a major oil and gas
customer. Operating revenues from contract-leasing activities increased by $15.2 million as additional medium and heavy helicopters were
placed on international contract-leases. As of December 31, 2011, 41 aircraft were dedicated to the contract-leasing market compared with 39 as
of December 31, 2010. Operating revenues from medical operations increased by $3.6 million primarily due to $1.1 million of additional
revenues generated from a new hospital contract and a $2.7 million increase in activity in support of an existing patient-pay customer. Operating
revenues for the FBO were $1.5 million higher primarily due to an increase in fuel sales prices.
Operating Expenses. Operating expenses were $15.5 million higher for the year ended December 31, 2011 compared with the year ended
December 31, 2010. Personnel costs were $2.7 million higher as additional personnel were added to support the increased activity discussed
above. Repair and maintenance costs increased by $5.6 million primarily due to enrolling additional helicopters in power-by-hour maintenance
programs. Fuel costs increased by $5.0 million primarily due to an increase in the price of fuel. Other operating expenses were $2.9 million
higher primarily due to an $1.9 million increase in support of search and rescue activities, which began in late 2010, a $0.4 million increase from
higher air medical activities and a $2.3 million increase as a result of providing more parts and repair services to contract-leasing customers.
These increases were partially offset by the receipt of $1.9 million in insurance reimbursements relating to the 2008 Hurricanes Gustav and Ike,
following final settlement with the Company’s insurance carriers. In addition, insurance and loss reserves were $0.6 million lower primarily due
to the receipt of a good experience credit from its hull and machinery underwriters.
Administrative and General. Administrative and general expenses were $6.1 million higher for the year ended December 31, 2011
compared with the year ended December 31, 2010 primarily due to $4.0 million in severance costs associated with a change in executive
management, a $0.6 million increase in information technology costs and a $0.5 million increase in costs related to international business
development and joint venture activities.
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Depreciation and Amortization. Depreciation and amortization expenses were $0.7 million lower for the year ended December 31, 2011
compared with the year ended December 31, 2010 primarily due to a change in estimate of the useful life and salvage value of helicopters, which
reduced depreciation expense by $7.6 million, partially offset by the addition of new and higher cost equipment. Effective July 1, 2011, the
Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to
improvements in new aircraft models that continue to increase their long-term value and make them viable for operation over a longer period of
time.
Gains on Asset Dispositions and Impairments, Net. During 2011, the Company sold ten helicopters and other equipment and received
insurance proceeds related to the loss of an aircraft. The Company received net proceeds of $26.0 million on the disposition of these assets,
including insurance proceeds, and had gains of $16.3 million of which $14.3 million was recognized currently and $2.0 million was deferred. In
addition, the company recognized previously deferred gains of $0.7 million and a gain of $1.3 million from insurance proceeds relating to the
loss of an aircraft. During 2010, the Company sold two helicopters and other equipment for net proceeds of $0.9 million and gains of $0.5
million. In addition, the Company recognized previously deferred gains of $0.6 million and recognized a loss of $0.3 million relating to the
impairment of four EC120 helicopters.
Operating Income. Excluding gains on asset dispositions and impairments, operating income as a percentage of operating revenues was
consistent in both periods at 8%.
December 31, 2009. Operating revenues in the U.S. Gulf of Mexico were $8.9 million lower primarily due to a $19.4 million decrease driven by
a reduction in the number of aircraft operating in the region and lower flight hours supporting oil and gas activities following the Deepwater
Horizon incident. These reductions were partially offset by revenues of $10.5 million generated by equipment contracted to the U.S. Coast
Guard in support of the Oil Spill Response. Operating revenues in Alaska were $3.0 million higher primarily due to an increase in the number of
helicopters on contract in support of oil and gas activities. Operating revenues from contract-leasing activities increased by $22.1 million as
additional aircraft were placed on international contract-leases, primarily in Brazil. As of December 31, 2010, 39 aircraft were dedicated to the
contract-leasing market compared with 35 as of December 31, 2009. Operating revenues from air medical services were $15.0 million lower due
to the non-renewal of several contracts upon their conclusion. Operating revenues for the FBO were $1.8 million lower primarily due to the loss
of a significant customer during 2009.
December 31, 2009. Personnel costs were $4.4 million lower primarily due to a $4.1 million reduction in wage and benefit costs for air medical
services in line with reduced activity and a $1.8 million reduction in crew subsistence costs in the U.S. Gulf of Mexico. These decreases were
partially offset by a $1.7 million increase in wage and benefit costs in Alaska in support of additional helicopters on contract. Repair and
maintenance costs were $3.7 million higher primarily due to a $5.8 million increase as additional aircraft were placed in power-by-hour
maintenance contracts and a $4.2 million increase due to the timing of major repairs, partially offset by a $6.2 million reduction in maintenance
spending in air medical services as a result of fewer contracts. Fuel expenses decreased by $1.7 million primarily due to a reduction in FBO fuel
sales. Other operating expenses were $3.2 million higher primarily due to the receipt of $5.7 million in insurance reimbursements in 2009 for
expenses incurred following Hurricanes Gustav and Ike in 2008. This was partially offset by a $2.3 million reduction in costs attributable to a
firefighting contract completed in 2009.
compared with the year ended December 31, 2009 primarily due to $2.0 million in higher wage and benefit costs and the 2009 reversal of a $1.5
million provision for doubtful accounts following its collection.
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Table of Contents
Depreciation and Amortization. Depreciation expense was $6.0 million higher for the year ended December 31, 2010 compared with the
year ended December 31, 2009 primarily due to the continued modernization of the fleet through the addition of new and higher cost equipment.
Operating Income. Operating income as a percentage of operating revenues was 8% in 2010 compared with 12% in 2009. The decrease
was primarily due to the receipt of insurance proceeds in 2009 for expenses incurred in 2008 following Hurricanes Gustav and Ike and the 2009
reversal of a provision for doubtful accounts following its collection. Excluding the impact of these items, operating income as a percentage of
operating revenues was 9% in 2009.
Historically, activity levels for grain exports and non-grain imports are the key drivers in determining freight rates. Domestic corn
production has declined for two consecutive years resulting in a negative impact on river export volumes, which fell by over 10% in 2011
compared with 2010. The weakness in the grain export markets in 2011 was somewhat offset by a significant improvement in the coal export
market. The United States has traditionally been a residual exporter of coal and in 2011 rising demand in China and production issues in other
exporting countries combined to push Mississippi coal exports to over 18 million tons, up from eight million tons in 2010. The improvements in
the coal freight markets led some operators to switch their barges to carry coal instead of grain. This reduced the available supply of grain barges
and helped to support grain freight rates.
Weather conditions again presented challenges to the industry during 2011. Excessive rain in the Corn Belt throughout the spring and early
summer delayed planting, stunted crop growth, flooded thousands of acres of farmland and pushed commodity prices to record highs. The spring
floods were particularly troublesome. River locks were periodically closed, river traffic was halted to protect levee integrity, shippers were
forced to cease operations, tow sizes were limited and fuel efficiency was reduced. Operations did not return to normal until the third quarter of
the year. In the fourth quarter, low water periodically limited drafts and earning potential on points south of St. Louis on the Mississippi River
and on the Lower Ohio River.
At the end of 2011, the average age of the Inland River Services’ dry cargo barge fleet was 6 years old, which the Company believes is
among the youngest fleets operating on the U.S. Inland River Waterways system. Inland River Services believes that approximately 25% of the
dry cargo barge fleet operating on the U.S. Inland River Waterways is over 20 years old. Inland River Services believes the relatively young age
of its dry cargo barge fleet enhances its availability and reliability, reduces downtime for repairs and obviates, for the immediate future, the
necessity of replacement capital expenditures to maintain its fleet size and revenue generating capacity.
The aggregate cost of Inland River Services’ operations depends primarily on the size and mix of its fleet. Inland River Services’ operating
costs and expenses are grouped into the following categories:
•
barge logistics (primarily towing, switching, fleeting and cleaning costs);
•
•
repairs and maintenance (primarily repairs and maintenance on towboats, which are performed in accordance with planned
maintenance programs);
•
insurance and loss reserves (primarily the cost of Hull and Machinery, Protection and Indemnity and Cargo insurance premiums and
loss deductibles);
•
•
leased-in equipment (includes the cost of leasing equipment, including bought-in freight and towboats, from lessors under bareboat
charter arrangements); and
•
other (rail car logistics, property taxes and other).
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Table of Contents
Operating Revenues:
United States
Foreign
Costs and Expenses:
Operating:
Barge logistics
Personnel
Leased-in equipment
Other
Gains on Asset Dispositions
Operating Income
Other, net
Equity in Earnings of 50% or Less Owned Companies
Segment Profit
71
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
187,657
—
187,657
100
—
100
161,697
—
161,697
100
—
100
154,991
107
155,098
100
—
100
80,506
13,255
4,443
2,392
2,320
10,370
6,213
119,499
11,339
23,494
154,332
2,964
36,289
43
7
3
1
1
6
3
64
6
12
82
1
19
54,296
13,011
4,860
3,005
3,965
12,491
5,550
97,178
10,691
20,721
128,590
31,928
65,035
33
8
3
2
2
8
4
60
7
13
80
20
40
42,884
13,323
4,815
2,625
2,538
20,095
3,164
89,444
8,764
19,357
117,565
4,706
42,239
28
8
3
2
2
13
2
58
6
12
76
3
27
4
4,136
40,429
—
2
21
2,237
3,708
70,980
2
2
44
—
3,882
46,121
—
3
30
Table of Contents
Operating Revenues by Service Line. The following table presents, for the years indicated, operating revenues by service line.
Operating Revenues:
Dry cargo barge pools
Liquid unit tow operation
Charter-out of dry cargo barges
10,000 barrel liquid tank barge operations
Inland river towboat operations and other activities
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
110,325
27,157
9,097
16,277
24,801
187,657
89,935
30,109
8,605
10,180
22,868
161,697
84,621
29,881
9,454
7,660
23,482
155,098
59
14
5
9
13
100
56
19
5
6
14
100
55
19
6
5
15
100
Dry Cargo Barge Pools Operating Data. The following table presents, for the years indicated, Inland River Services’ interest in tons
moved and its available barge days in the dry cargo barge pools. Available barge days represents the total calendar days during which the
Company’s owned and chartered-in barges were in the pool.
2011
Tons
Tons Moved (in thousands):
Grain
Non-Grain
4,691
1,627
6,318
Available Barge Days
2010
%
74
26
100
Tons
3,121
1,395
4,516
2009
%
69
31
100
Tons
2,645
1,089
3,734
Days
Days
Days
196,820
168,109
140,616
%
71
29
100
December 31, 2010. Operating revenues from dry cargo barge pool operations were $20.4 million higher primarily due to a larger fleet following
the addition of newly constructed dry cargo barges and the addition of dry cargo barges previously included in the Seaspraie joint
venture. Operating revenues from liquid unit tow operations were $3.0 million lower primarily due to lower contract rates and reduced
utilization. Operating revenues from 10,000 barrel liquid tank barge operations were $6.1 million higher primarily due to the addition of barges
previously included in the Seaspraie joint venture. Operating revenues from inland river towboat operations and other activities were $1.9
million higher primarily due to the commencement of towboat repair operations.
December 31, 2010. The increase was primarily due to increased barge logistic expenses as a result of the larger fleet, higher fuel prices and
high-water towing escalators as a result of difficult operating conditions throughout the first half of 2011 and higher repositioning costs due to
delays in the commencement of the 2011 grain harvest.
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Gains on Asset Dispositions. During 2011, the Company sold one towboat, six deck barges, one liquid tank barge and other equipment for
proceeds of $4.5 million and gains of $0.2 million. In addition, the company recognized previously deferred gains of $2.8 million. During 2010,
the Company sold 60 dry cargo barges to its South American joint venture and other equipment for proceeds of $25.8 million and gains of $16.5
million. In addition, the company recognized previously deferred gains of $15.5 million, of which $12.2 million related to the Company’s
acquisition of a controlling interest in its Seaspraie joint venture.
Operating Income. Excluding the impact of gains on asset dispositions, operating income as a percentage of operating revenues was 18%
in 2011 compared with 20% in 2010. The decrease was primarily attributable to the increased barge logistic expenses noted above.
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. During the third quarter of 2011, the Company obtained a 100%
controlling interest in Soylutions LLC through the acquisition of its partner’s 50% interest. Upon the acquisition, the Company adjusted its
investment in Soylutions to fair value resulting in the recognition of a gain of $2.3 million, net of tax. During the fourth quarter of 2010, the
Company obtained a 100% controlling interest in Seaspraie Holdings LLC through the acquisition of its partner’s 50% interest. Upon the
acquisition, the Company adjusted its investment in Seaspraie to fair value resulting in the recognition of a gain of $2.5 million, net of tax.
December 31, 2009. Operating revenues from dry cargo barge pool operations were $5.3 million higher primarily due to a larger fleet following
the addition of newly constructed barges, the return of barges previously chartered-out, the addition of equipment previously included in a joint
venture, and increased demurrage revenues. These increases were partially offset by a reduction in revenues from bought-in-freight activities.
Operating revenues for the 10,000 barrel liquid tank barges increased by $2.5 million primarily due to equipment additions.
December 31, 2009. Barge logistics expenses were $11.4 million higher primarily due to more activity in the dry cargo barge pool and a 22%
increase in fuel prices. The cost of leased-in equipment was $7.6 million lower primarily due to a reduction in bought-in-freight activities.
Gains on Asset Dispositions. During 2010, the Company sold 60 dry cargo barges to its South American joint venture and other equipment
for proceeds of $25.8 million and gains of $16.5 million. In addition, the company recognized previously deferred gains of $15.5 million, of
which $12.2 million related to the Company’s acquisition of a controlling interest in its Seaspraie joint venture. During 2009, the Company sold
five dry cargo barges, three towboats and other equipment for proceeds of $20.3 million and gains of $16.4 million, of which $2.3 million was
recognized currently and $14.1 million was deferred. In addition, the company also recognized previously deferred gains of $2.4 million.
Operating Income. Excluding the impact of gains on asset dispositions, operating income as a percentage of operating revenues was 20%
in 2010 compared with 24% in 2009. The decrease was primarily attributable to the increased barge logistic expenses noted above.
Other, net. Other, net includes the sale of the Company’s claim against the prime broker for one of its joint ventures that was impaired in
2008.
Demand for the Company’s tankers is dependent on several factors, including petroleum production and refining activity levels in the
United States, domestic consumer and commercial consumption of petroleum products, and chemicals and competition from foreign imports of
oil products. During 2006 and 2007, orders
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placed by industry participants for the construction of new double-hulled vessels qualified for operation in the U.S. coastwise trade created
uncertainty as to whether the market would be able to absorb such additional capacity. In response to the uncertainty of both demand and supply
factors and in order to secure a portion of the fleet’s future earnings, Marine Transportation Services entered into long-term arrangements to
bareboat charter-out four vessels with staggered delivery dates. The first vessel began its charter in March 2007, the second in September 2008,
the third in January 2010, and the fourth in August of 2010.
As of December 31, 2011, the Company believes that third parties have contracted to build approximately five U.S.-flag tank vessels that
could compete with Marine Transportation Services’ equipment and that three of such vessels are scheduled to be delivered in 2012 and two
vessels in 2013. It is anticipated that one U.S.-flag tank vessel will be retired under OPA 90 regulations in 2012 and additional two vessels will
be retired in 2013 to 2014.
G&G Shipping Acquisition. In April 2011, Marine Transportation Services acquired real property, eight foreign-flag Roll-on/Roll-off
(“RORO”) vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the
Caribbean. This operating company leases-in the real property and the RORO vessels from the Company.
Marine Transportation Services’ operating costs and expenses are grouped into the following categories:
•
•
repairs and maintenance (primarily routine repairs and maintenance and overhauls which are performed in accordance with planned
maintenance programs);
•
drydocking (primarily the cost of regulatory drydockings performed in accordance with applicable regulations);
•
insurance and loss reserves (primarily the cost of Hull and Machinery and Protection and Indemnity insurance premiums and loss
deductibles);
•
•
leased-in equipment (includes the cost of leasing tankers from lessors under bareboat charter arrangements); and
•
other (port charges, freight, vessel inspection costs and other).
Vessel drydockings are regularly performed in accordance with applicable regulations and the Company expenses drydocking costs as
incurred. If a disproportionate number of drydockings are undertaken in a particular fiscal year or quarter, operating expenses may vary
significantly when compared with a prior year or prior quarter.
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Table of Contents
2011
Operating Revenues:
United States
Foreign
Costs and Expenses:
Operating:
Personnel
Drydocking
Leased-in equipment
Other
Gains (Losses) on Asset Dispositions and Impairments, Net
Operating Income (Loss)
Other, net
Equity in Losses of 50% or Less Owned Companies
Segment Profit (Loss)
75
2010
Amount
$ ’000
Percent
%
70,052
23,084
93,136
75
25
100
16,573
3,050
1,960
1,083
6,716
12,146
11,567
53,095
8,864
22,079
84,038
1,125
10,223
(11)
274
(74)
10,412
Amount
$ ’000
2009
Percent
%
Amount
$ ’000
Percent
%
76,163
—
76,163
100
—
100
92,866
—
92,866
100
—
100
18
3
2
1
7
13
13
57
9
24
90
1
11
20,385
2,386
5,631
2,778
3,777
1,888
2,430
39,275
5,002
28,645
72,922
(18,688)
(15,447)
27
3
7
4
5
3
3
52
6
38
96
(24)
(20)
25,518
4,391
4,152
4,099
7,417
1
4,990
50,568
4,122
32,006
86,696
—
6,170
28
5
4
4
8
—
5
54
4
35
93
—
7
—
—
—
11
22
—
—
(15,425)
—
—
—
(20)
(1)
—
—
6,169
—
—
—
7
Table of Contents
Operating Revenues by Type. The table below sets forth, for the years indicated, operating revenues earned by type.
2011
Amount
$ ’000
Operating Revenues:
Time charter
Bareboat charter
Contract of affreightment and other
G&G Shipping
35,825
35,040
(248)
22,519
93,136
Percent
%
38
38
—
24
100
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
43,552
28,968
3,643
—
76,163
52,073
17,520
23,273
—
92,866
57
38
5
—
100
56
19
25
—
100
December 31, 2010. Excluding the impact of the G&G acquisition, which occurred in April 2011 and accounted for a $22.5 million increase,
operating revenues were $5.5 million lower. Time charter revenues were $7.7 million lower primarily due to the change in contract status of one
vessel from time charter to long-term bareboat charter effective August 21, 2010, partially offset by fewer off-hire days for regulatory
drydockings. Bareboat charter revenues were $6.1 million higher due to the change in contract status of one vessel from time charter to longterm bareboat charter. Contract of affreightment and other revenues were $3.9 million lower primarily due to the lay-up of the Seabulk America
in August 2010.
December 31, 2010. Excluding the impact of the G&G Shipping acquisition, which accounted for a $19.1 million increase, operating expenses
were $5.3 million lower primarily due to the change in contract status of two time charter vessels to long-term bareboat charter, the sale of the
Seabulk America and reduced drydocking activity. In 2010, two vessels underwent regulatory drydockings compared with 2011 when one vessel
underwent an underwater survey. These reductions in operating costs were partially offset by a $10.3 million increase in leased-in equipment
expenses primarily due to the sale-leaseback of two vessels in the fourth quarter of 2010. The $9.1 million increase in other operating expenses
was primarily due to the G&G acquisition.
compared with the year ended December 31, 2010 primarily due to the G&G Shipping acquisition.
compared with the year ended December 31, 2010 primarily due to sale-leaseback of two vessels in the fourth quarter of 2010 partially offset by
an increase for assets acquired in the G&G Shipping acquisition.
Gains on Asset Dispositions and Impairments, Net. During 2011, the Company sold one U.S.-flag product tanker, the Seabulk America
for net proceeds of $5.5 million and a gain of $1.1 million.
Operating Income. Excluding the impact of gains on asset dispositions and impairments, operating income as a percentage of operating
revenues was 10% for the year ended December 31, 2011 compared with 4% for the year ended December 31, 2010 primarily due to the change
in contract status for one vessel from time charter to long-term bareboat charter, a reduction in drydocking activity and the sale of the Seabulk
America .
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Table of Contents
December 31, 2009. Time charter revenues were $8.5 million lower primarily due to changes in the contract status of two vessels from time
charter to long-term bareboat charter, one effective January 21, 2010 and the other effective August 21, 2010. Bareboat charter revenues were
$11.4 million higher due to the change in contract status of the two vessels to long-term bareboat charter. Contract of affreightment and other
revenues were $19.6 million lower due to fewer vessels operating in the spot market, reduced spot market demand and the lay-up of the Seabulk
America in August 2010.
December 31, 2009 consistent with more vessels operating under bareboat charters and fewer vessels operating in the spot market. Drydocking
expenses were $1.5 million higher in 2010 as two tankers underwent regulatory drydockings and two others underwent short handover
drydockings prior to commencing long-term bareboat charters. Leased-in equipment expenses were $1.9 million higher in 2010 due to the saleleaseback of two vessels under long-term bareboat charters in the fourth quarter of 2010.
compared with the year ended December 31, 2009 primarily due to a $1.7 million decrease as a result of the sale-leaseback of two vessels and a
$1.7 million decrease because of the write-down of the Seabulk America , which was reduced to fair value in the third quarter.
Gains (Losses) on Asset Dispositions and Impairments, Net. During 2010, the Company sold two U.S.-flag product tankers for net
proceeds of $181.0 million and gains of $69.3 million, all of which was deferred. In addition, the Company recorded an impairment charge of
$18.7 million to write-down of the Seabulk America to fair value in August 2010.
Operating Income. Excluding the impact of losses on asset dispositions and impairments, operating income as a percentage of operating
revenues was 4% in 2010 compared with 7% in 2009. The decrease was primarily due to the lay-up of the Seabulk America and higher
drydocking costs .
Environmental Services charges fees for its consulting and response management/remediation services on both a time and material basis
and on a fixed fee bid basis. In both cases, the total fees charged are dependent upon the scope of work to be accomplished and the labor and
other direct costs required to carry out the work. The margins on time and material services are more predictable and represent a lower risk;
however, margins on fixed fee work may be greater if estimated properly and costs are controlled adequately.
Operating results and cash flows can be very dependent on the number of emergency responses in a given fiscal period, the magnitude of
each emergency and the profit margin earned. Consequently, emergency response revenues and related income can vary materially between
comparable periods. The revenues from any one period are not indicative of a trend or anticipated results in future periods. Environmental
Services’ 2010 operating results were significantly impacted by its involvement in the Oil Spill Response.
Costs of emergency response activities can include payments to sub-contractors for labor, equipment and materials and/or the direct charge
of labor and to a lesser extent equipment and materials provided by Environmental Services. Profit margins vary based on the use of the
Company’s personnel and equipment resources versus the use of third-party personnel and equipment.
The principal components of Environmental Services’ operating expenses are salaries and related benefits for operating personnel and
payments to subcontractors. These expenses are primarily a function of the level of retainer, spill, consulting and other environmental business
activities.
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Table of Contents
Environmental Services’ business is conducted through SEACOR Environmental Services Inc. (“SES”) and O’Brien’s Response
Management Inc. (“ORM”). SES includes National Response Corporation, one of the largest providers of oil spill response services in the
United States; NRC Environmental Services Inc., a leading provider of environmental and industrial services on the West Coast of the United
States; SEACOR Response Ltd., which provides oil spill and emergency response services to customers in various international markets; and
certain other subsidiaries (collectively the “SES Business”). On February 7, 2012, SEACOR announced it had reached an agreement to sell the
SES Business to J.F. Lehman & Company, a leading, middle-market private equity firm. The closing of the transaction is conditioned upon the
buyer obtaining certain debt financing and other customary conditions. Either the Company or the buyer may terminate the stock purchase
agreement if the closing has not occurred by March 31, 2012. The transaction does not include ORM, a leading provider of crisis and emergency
preparedness and response services. Summarized selected operating results of the SES Business for the years ended December 31 were as
follows (in thousands):
Operating Revenues
Operating Income
Segment Profit
78
2011
2010
2009
$131,346
13,012
13,030
$681,082
139,771
140,392
$104,478
3,906
4,210
Table of Contents
Operating Revenues:
United States
Foreign
Costs and Expenses:
Operating:
Subcontractors
Personnel
Fuel, lube and supplies
Other
Gains (Losses) on Asset Dispositions
Operating Income
Other, net
Segment Profit
79
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
187,141
24,495
211,636
88
12
100
846,931
27,462
874,393
97
3
100
125,111
20,656
145,767
86
14
100
68,240
42,048
4,706
3,029
8,224
9,766
136,013
33,014
9,473
178,500
(54)
33,082
32
20
2
1
4
5
64
16
4
84
—
16
525,159
44,520
5,030
2,580
6,789
9,210
593,288
31,555
8,396
633,239
510
241,664
60
5
1
—
1
1
68
3
1
72
—
28
44,067
37,506
4,467
2,821
5,716
9,184
103,761
25,452
7,150
136,363
(197)
9,207
30
26
3
2
4
6
71
18
5
94
—
6
12
2
(53)
33,043
—
—
—
16
(105)
1
683
242,243
—
—
—
28
9
—
225
9,441
—
—
—
6
Table of Contents
Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by
Environmental Services’ from its various service lines.
Operating Revenues:
Response Services
Retainer Services
Standby Services
Professional Services
Software Services
Project Management
Equipment Sales and Leasing
2011
Amount
Percent
$ ’000
%
2010
Amount
Percent
$ ’000
%
2009
Amount
Percent
$ ’000
%
92,443
30,537
14,815
17,371
611
50,092
5,767
211,636
731,435
28,158
11,623
15,874
2,433
76,061
8,809
874,393
40,251
28,058
6,357
19,333
—
44,412
7,356
145,767
44
14
7
8
—
24
3
100
84
3
1
2
—
9
1
100
28
19
4
13
—
31
5
100
December 31, 2010 primarily due to lower emergency response and project management revenues related to the Oil Spill Response. Emergency
response activities accounted for 44% and 84% of Environmental Services’ operating revenues in 2011 and 2010, respectively.
Costs and Expenses. Operating expenses were $457.3 million lower for the year ended December 31, 2011 compared with the year ended
December 31, 2010. The reduction was primarily due to a reduction in personnel employed and third party resources engaged, due to the
winding down of Oil Spill Response activities.
compared with the year ended December 31, 2010 primarily due to higher information technology and professional costs.
Operating Income. Operating income as a percentage of operating revenues was 16% for 2011 compared with 28% for 2010. The decrease
was primarily due to higher revenues achieved in 2010 related to the Oil Spill Response and higher administrative and general and depreciation
and amortization costs in 2011.
December 31, 2009 due to increased emergency response and project management revenues related to the Oil Spill Response. Emergency
response activities accounted for 84% and 28% of Environmental Services’ operating revenues in 2010 and 2009, respectively.
December 31, 2009. The increase was primarily due to additional personnel employed and additional resources required from third parties to
support the Oil Spill Response activities.
Increased subcontractor and personnel costs of $481.1 million and $7.0 million, respectively, were due to additional personnel employed
and additional resources required from third parties as a result of the Oil Spill Response.
80
Table of Contents
compared with the year ended December 31, 2009 primarily due to higher wages and compensation expense.
Operating Income. Operating income as a percentage of operating revenues was 28% in 2010 compared with 6% in 2009. The
improvement was primarily due to the Oil Spill Response.
The profitability of Commodity Trading and Logistics is affected by the availability and market prices of energy and agricultural
commodities and the availability and costs of transportation and logistics services, including pipeline, truck, barge, rail and ocean freight.
Commodity Trading and Logistics expects that population growth, rising standards of living and rising global demand for renewable fuels
will continue to increase global demand for agricultural and energy commodities. However, from time to time, imbalances may exist between
capacity and demand for rice, sugar and energy-related products in certain markets, which impacts whether, when and where to purchase, store,
transport or sell these commodities.
2011
Amount
$ ’000
Operating Revenues:
United States
Foreign
Costs and Expenses:
Operating
Derivative gains (losses), net (1)
Other, net
(1)
2010
Percent
%
Amount
$ ’000
2009
Percent
%
Amount
$ ’000
Percent
%
714,097
241,591
955,688
75
25
100
589,021
152,875
741,896
79
21
100
294,735
177,840
472,575
62
38
100
940,506
8,404
57
948,967
6,721
98
1
—
99
1
729,135
11,435
61
740,631
1,265
98
2
—
100
—
460,713
12,644
29
473,386
(811)
97
3
—
100
—
—
—
—
—
—
4,028
498
25
(95)
3,645
1
—
—
—
1
(5,734)
104
(167)
(1,815)
(891)
(1)
—
—
—
—
(4,580)
(531)
787
(604)
(3,663)
In the Company’s energy and sugar trading businesses, fixed price future purchase and sale contracts for ethanol and sugar are included in derivative positions at fair value. The Company
routinely enters into exchange traded positions to offset its net commodity market exposure on these purchase and sale contracts as well as its inventory balances. As a result, derivative
gains (losses), net recognized during any period are predominately offset by fair value adjustments included in operating revenues and expenses on completed transactions, subject to
certain timing differences on the delivery of physical inventories. As of December 31, 2011 and 2010, the net market exposure to ethanol and sugar under its contracts and inventory
balances was not material.
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Table of Contents
Operating Revenues and Segment Profit (Loss) by Commodity. The table below sets forth, for the periods indicated, the amount of
revenues earned and segment profit by Commodity Trading and Logistics from its respective activities by commodity.
2011
Amount
$ ’000
Operating Revenues:
Energy
Sugar
Rice and Salt
Intersegment eliminations
731,164
213,051
11,709
(236)
955,688
Segment Profit (Loss):
Energy
Sugar
Rice and Salt
(223)
1,033
(1,701)
(891)
2010
Percent
%
77
22
1
—
100
(25)
116
(191)
(100)
Amount
$ ’000
585,575
103,055
53,266
—
741,896
4,400
937
(9,000)
(3,663)
2009
Percent
%
79
14
7
—
100
120
26
(246)
(100)
Amount
$ ’000
273,359
77,614
121,602
—
472,575
6,047
(652)
(1,750)
3,645
Percent
%
58
16
26
—
100
166
(18)
(48)
100
Energy. Segment results decreased by $4.6 million for the year ended December 31, 2011 compared with the year ended December 31,
2010. The decrease was primarily due to a reduction in freight revenues as a result of the non-renewal of a contract, higher third party freight and
storage costs, lower ethanol sales volumes, losses on exchange traded derivative positions hedging physical inventory balances and higher losses
from the Company’s alcohol manufacturing joint venture. These decreases were partially offset by lower administrative and general expenses.
Sugar. Segment results improved by $0.1 million for the year ended December 31, 2011 compared with the year ended December 31,
2010. Trading volumes increased due to expansion into new markets and larger average trade size, however margins remained in line with 2010
levels.
Rice and Salt. Segment results improved by $7.3 million for the year ended December 31, 2011 compared with the year ended
December 31, 2010 primarily due to costs incurred during the winding down of rice trading activities and the market write-downs of rice
inventories in 2010. As previously reported, the Company has significantly reduced its rice trading activities.
Energy. Operating revenues were $312.2 million higher for the year ended December 31, 2010 compared with the year ended
December 31, 2009 due to increased activity in renewable fuel and clean blendstock trading, including logistics and transport, and hydrocarbon
transportation revenues. Segment profit decreased by $1.6 million primarily due to lower margins on activities, the recognition of derivative
losses on hedging physical inventory positions and start-up costs associated with the Company’s alcohol manufacturing joint venture.
Sugar. Segment results increased $1.6 million for the year ended December 31, 2010 compared with the year ended December 31, 2009
primarily due to the recognition of a $1.5 million bad debt provision in 2009.
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Table of Contents
Rice and Salt. Segment losses increased by $7.3 million from rice activities in 2010 compared with 2009 primarily due to costs incurred
during the winding down of rice trading activities and market write-downs of rice inventories. As previously reported, the Company has decided
to reduce its rice activities and has substantially liquidated its rice inventories.
Other Segment Profit
2011
$ ’000
Harbor and Offshore Towing Services
Other Activities
Segment Profit
13,230
(600)
(1,524)
11,106
2010
$ ’000
11,835
(1,409)
223
10,649
2009
$ ’000
7,091
(1,458)
(811)
4,822
Harbor and Offshore Towing Services. Segment profit was $1.4 million higher for the year ended December 31, 2011 compared with the
year ended December 31, 2010 primarily due to higher fuel surcharges, tariff increases in certain ports and lower operating costs following the
sale of two tugs, the return of one chartered-in tug to its owner and lower insurance and drydocking expenses. These increases were partially
offset by higher fuel costs. Segment profit was $4.7 million higher for the year ended December 31, 2010 compared with the year ended
December 31, 2009 primarily due to activity associated with the Oil Spill Response. The benefit was partially offset by higher repair and fuel
costs and higher expenses related to insurance incidents.
Other Activities, net. Segment loss in 2011 resulted primarily from expenditures for business development in Asia related to industrial air
services, partially offset by income from the Company’s lending and leasing activities.
Equity in earnings (losses) of 50% or Less Owned Companies. Equity in losses of 50% or less owned companies in 2011 were primarily
due to losses in one of the Company’s industrial air services joint ventures in Asia.
Corporate and Eliminations
2011
$ ’000
Corporate Expenses
Eliminations
Operating Loss
Other, net
2010
$ ’000
2009
$ ’000
(37,404)
—
(37,404)
(47,692)
212
(47,480)
(33,355)
306
(33,049)
(29,075)
3,395
(521)
10,903
(5,608)
597
6,842
3,555
91
Corporate Expenses. Corporate expenses in 2010 were higher primarily due to higher management bonus accruals, the acceleration of
restricted stock awards into 2010 that were scheduled to lapse in 2011, and amounts designated for a foundation that will provide financial
support to selected charities and projects in various parts of the Southeastern United States affected by the Deepwater Horizon oil spill.
83
Table of Contents
Derivative gains (losses), net. Derivative losses, net in 2011 were primarily due to losses on U.S. Treasury note, rate lock and bond future
and option contracts of $28.3 million. Derivative gains, net in 2010 were primarily due to gains on U.S. Treasury note, rate lock and bond future
and option contracts of $8.5 million, forward currency exchange option and future contracts of $3.9 million and equity options of $2.1 million
partially offset by losses on interest rate swaps of $3.5 million. Derivative gains, net in 2009 were primarily due to gains on forward currency
exchange option and future contracts of $2.3 million and equity options of $3.1 million.
Foreign currency gains (losses), net. Foreign currency gains, net in 2011 were primarily due to a strengthening of the U.S. dollar against
the euro underlying certain of the Company’s marketable securities and cash balances. Foreign currency losses, net in 2010 were primarily due
to a strengthening of the U.S. dollar against foreign currencies underlying certain of the Company’s intercompany notes receivable and cash
balances. Foreign currency gains, net in 2009 were primarily due to a weakening of the U.S. dollar against foreign currencies underlying certain
of the Company’s intercompany notes receivable.
Other Income (Expense) not included in Segment Profit
2011
$’000
Interest income
Interest expense
Debt extinguishment gains (losses), net
Marketable security gains (losses), net
13,756
(41,245)
(99)
(7,893)
(35,481)
2010
$’000
8,882
(43,950)
(1,460)
(2,159)
(38,687)
2009
$’000
4,466
(59,043)
(5,587)
24,059
(36,105)
Interest income. Interest income increased in 2011 compared with 2010 primarily due to higher lending and leasing activities. Interest
income increased in 2010 compared with 2009 primarily due to higher invested cash balances.
Interest expense. Interest expense decreased in 2011 primarily due to higher capitalized interest. Interest expense decreased in 2010 due to
lower outstanding debt and higher capitalized interest.
Debt extinguishment gains, net. During 2010, the Company purchased or redeemed outstanding debt that resulted in net losses on debt
extinguishments of $1.5 million. The net losses resulted primarily from the purchase of the Company’s 7.375% Senior Notes. During 2009, the
Company purchased or redeemed outstanding debt that resulted in net losses on debt extinguishments of $5.6 million. The net losses resulted
primarily from the settlement of the Company’s 2.875% Convertible Debentures, partially offset by gains on the purchase and redemption of the
9.5% Senior Notes.
Marketable security gains (losses), net. In 2011, marketable security losses, net were due to losses on the Company’s long marketable
security positions of $13.4 million partially offset by gains on short sales of marketable securities of $5.5 million. In 2010, marketable security
losses, net were due to losses on short sales of marketable securities of $5.0 million partially offset by gains on long marketable security
positions of $2.8 million. In 2009, marketable security gains, net were due to gains on long marketable security positions of $27.1 million
partially offset by losses on short sales of marketable securities of $3.0 million.
Income Taxes
The Company’s effective income tax rate in 2011, 2010 and 2009 was 39.7%, 37.7% and 38.4%, respectively.
84
Table of Contents
Liquidity and Capital Resources
Overview
The Company’s ongoing liquidity requirements arise primarily from working capital needs, and its obligations to meet capital
commitments and repay debt obligations. The Company may use its liquidity to fund acquisitions, repurchase shares of SEACOR common
stock, par value $0.01 per share (“Common Stock”), for treasury or to make other investments. Sources of liquidity are cash balances,
marketable securities, construction reserve funds, Title XI reserve funds, cash flows from operations and borrowings under the Company’s
revolving credit facilities. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of
Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.
The Company’s unfunded capital commitments as of December 31, 2011 consisted primarily of offshore support vessels, helicopters,
inland river tank barges, harbor tugs, an interest in a river grain terminal, an interest in a dry-bulk articulated tug-barge and other property and
equipment. These commitments totaled $312.5 million, of which $199.3 million is payable during 2012 with the balance payable through 2014.
Of the total unfunded capital commitments, $43.6 million may be terminated without further liability other than the payment of liquidated
damages of $1.4 million. Subsequent to December 31, 2011, the Company committed to purchase additional equipment for $50.3 million.
As of December 31, 2011, construction reserve funds of $250.4 million were classified as non-current assets in the accompanying
condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment.
which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of
December 31, 2011, the remaining authority under the repurchase plan was $41.8 million. On January 18, 2012, SEACOR’s Board of Directors
increased the repurchase authority to $150.0 million.
SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its
7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise,
depending on market conditions.
As of December 31, 2011, the Company had $427.0 million of outstanding borrowings under its revolving credit facilities. The remaining
availability under SEACOR’s Revolving Credit Facility as of December 31, 2011 was $228.5 million, net of issued letters of credit of $1.5
million. This facility was reduced by 10% of the maximum committed amount of $450.0 million in November 2011 and will be reduced by a
further 10% in November 2012. On December 22, 2011, Era Group Inc. (“Era”), a subsidiary of SEACOR that operates its Aviation Services
business segment, entered into a $350.0 million senior secured revolving credit facility that matures in December 2016 and is secured by
substantially all of the tangible and intangible assets of Era. The remaining availability under the Era Group Inc. Senior Secured Revolving
Credit Facility as of December 31, 2011 was $98.0 million. In addition, the Company had other outstanding letters of credit totaling $60.5
million with various expiration dates through 2014.
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Table of Contents
Summary of Cash Flows
2011
$ ’000
Cash provided by or (used in):
Operating Activities
Investing Activities
Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
206,587
(331,956)
220,983
1,959
97,573
2010
$ ’000
399,417
19,228
(506,511)
(8,010)
(95,876)
2009
$ ’000
297,618
(101,700)
(6,327)
871
190,462
Operating Activities
Cash flows provided by operating activities decreased by $192.8 million during 2011 compared with 2010. Cash flows provided by
operating activities increased by $101.8 million during 2010 compared with 2009. The components of cash flows provided by (used in)
operating activities during the years ended December 31 were as follows:
2011
$ ’000
Operating income before depreciation and gains on asset dispositions and impairments, net
Changes in operating assets and liabilities before interest and income taxes
Purchases of marketable securities
Proceeds from sales of marketable securities
Dividends received from 50% or less owned companies
Interest paid, excluding capitalized interest
Income taxes paid, net of refunds
Other
Total cash flows provided by operating activities
246,208
(49,016)
(117,145)
178,016
9,582
(39,559)
(5,899)
(15,600)
206,587
2010
$ ’000
526,623
83,867
(107,716)
44,992
17,912
(43,445)
(125,600)
2,784
399,417
2009
$ ’000
364,244
(23,428)
(35,523)
61,595
15,920
(52,155)
(40,001)
6,966
297,618
During 2011, operating income before depreciation and gains on asset dispositions and impairments, net decreased by $280.4 million
compared with 2010 primarily due to the impact of the Oil Spill Response in 2010 and continuing weakness in the offshore marine market.
During 2010, operating income before depreciation and gains on asset dispositions and impairments, net increased by $162.4 million compared
with 2009 primarily due to the impact of the Oil Spill Response in 2010 partially offset by weakness in the offshore marine market. See
“Consolidated Results of Operations” included above for a discussion of the results for each of the Company’s business segments.
During 2011, changes in operating assets and liabilities before interest and income taxes used cash flows of $49.0 million primarily due to
final settlements with a customer and certain subcontractors in respect of the Oil Spill Response and increased working capital employed in
Aviation Services and Commodity Trading and Logistics. During 2010, changes in operating assets and liabilities before interest and income
taxes provided cash flows of $83.9 million primarily due to the positive working capital impact of the Oil Spill Response, the liquidation of rice
inventories in Commodity Trading and Logistics and the reduction of working capital in Offshore Marine Services resulting from declines in
activity.
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During 2011, cash used in operating activities included $26.5 million to purchase marketable security long positions and $90.6 million to
cover marketable security short positions. During 2011, cash provided by operating activities included $95.4 million received from the sale of
marketable security long positions and $82.6 million received upon entering into marketable security short positions.
Investing Activities
During 2011, net cash used in investing activities was $332.0 million primarily as follows:
•
Capital expenditures were $332.3 million. Equipment deliveries included three offshore support vessels, 55 inland river dry cargo
barges, two inland river liquid tank barges, nine helicopters and one harbor tug. In addition, the Company acquired a controlling
interest in an offshore support vessel.
•
Proceeds from the disposition of property and equipment were $101.8 million, including $36.3 million in proceeds upon entering into
a sale-leaseback transaction. The Company sold 11 offshore support vessels, 10 helicopters, one US-flagged product tanker, one
inland river towboat, one inland river liquid tank barge, six inland river dry cargo and deck barges, two harbor tugs and other
equipment.
•
The Company made investments in and advances to its 50% or less owned companies of $63.0 million.
•
The Company received returns of investments and advances from 50% or less owned companies of $22.3 million.
•
The Company made net advances on third party notes receivable of $36.2 million.
•
Construction reserve fund account transactions included withdrawals of $82.5 million and deposits of $18.6 million.
•
The Company acquired certain assets and liabilities of Lewis & Clark Marine, Inc. and certain related affiliates for $29.6 million.
•
The Company acquired 75% of the issued and outstanding shares in Windcat Workboats Holdings Ltd. for $21.5 million. The
acquired company had $3.3 million in cash at the time of acquisition.
•
The Company acquired certain real property, eight foreign-flag RORO vessels and a 70% interest in an operating company engaged
in the shipping trade between the United States, the Bahamas and the Caribbean for $33.5 million, which included cash consideration
of $30.3 million and the contribution of a $3.2 million note receivable. The acquired company had $1.6 million in cash at the time of
acquisition.
•
The Company obtained a 100% controlling interest in Soylutions LLC through its acquisition of its partner’s interest for $11.9
million in cash. The acquired company had $0.2 million in cash at the time of acquisition.
During 2010, net cash provided by investing activities was $19.2 million primarily as follows:
•
Capital expenditures were $250.6 million. Equipment deliveries included one offshore support vessel, 113 inland river dry cargo
barges, 17 inland river liquid tank barges, six helicopters and one tractor tug.
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•
Proceeds from the disposition of property and equipment were $361.7 million, including $217.3 million in proceeds upon entering
into sale-leaseback transactions. The Company sold eight offshore support vessels, two helicopters, one ocean liquid tank barge, 60
inland river dry cargo barges, two tankers and other equipment. In addition, the Company received insurance proceeds related to the
nationalization of one of its offshore support vessels and the total constructive loss of another offshore support vessel under
construction.
•
The Company made investments in, and advances to, 50% or less owned companies of $58.6 million.
•
The Company received returns of investments and advances from 50% or less owned companies of $15.1 million.
•
The Company released $21.4 million of restricted cash and $7.0 million of Title XI reserve funds into general purpose funds
primarily due to the redemption of all of the outstanding Title XI Bonds on two of the Company’s double-hull product tankers (as
noted below).
•
•
The Company made net investments in leases of $15.0 million.
During 2009, net cash used in investing activities was $101.7 million primarily as follows:
•
Capital expenditures were $180.0 million. Equipment deliveries included three offshore support vessels, three inland river towboats,
eight helicopters and three ocean liquid tank barges.
•
Proceeds from the dispositions of property and equipment were $103.7 million, including $17.7 million received upon the Company
entering into sale leaseback transactions. The Company sold 19 offshore support vessels, five inland river dry cargo barges, three
inland river towboats, two helicopters, four harbor tugs and other equipment. In addition, two helicopters were scrapped and two
helicopters were declared a total loss.
•
The Company made net investments in, and advances to, 50% or less owned companies of $27.5 million.
•
Financing Activities
During 2011, net cash provided by financing activities was $221.0 million. The Company:
•
purchased $2.2 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $2.3 million;
•
borrowed $298.9 million under the Company’s revolving credit facilities, net of issue costs, and issued other debt of $2.9 million;
•
repaid $22.8 million for the redemption of facility financing;
•
made scheduled payments on long-term debt and capital lease obligations of $14.5 million;
•
had net borrowings on inventory financing arrangements of $20.2 million;
•
received $11.9 million for share award plans; and
•
acquired for treasury 843,400 shares of Common Stock for an aggregate purchase price of $71.3 million.
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During 2010, net cash used in financing activities was $506.5 million. The Company:
•
paid a $15.00 per share dividend on Common Stock of $319.7 million;
•
redeemed all of the outstanding bonds on two of its double hull product tankers, in principal amount of $61.9 million, for an
aggregate purchase price of $63.0 million including a make-whole premium;
•
•
•
•
issued other secured debt in an aggregate principal amount of $38.7 million;
•
incurred net borrowings on inventory financing arrangements of $21.6 million;
•
received $26.2 million from share award programs; and
•
acquired for treasury 1,811,700 shares of Common Stock for an aggregate purchase price of $137.1 million.
During 2009, net cash used in financing activities was $6.3 million. The Company:
•
redeemed $18.4 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $18.4 million;
•
•
•
redeemed $81.7 million of the remaining principal balance outstanding of its 9.5% Senior Notes due 2013 for $84.3 million;
•
retired at maturity $32.8 million, in principal amount, of its 7.2% Senior Notes;
•
purchased $3.8 million, in principal amount, of its 2.875% Convertible Debentures due 2024 for $3.7 million;
•
redeemed the remaining balance of its 2.875% Convertible Debentures due 2024 for $32.9 million;
•
repaid $33.5 million under the Company’s revolving credit facility and $29.2 million of other secured debt;
•
•
incurred net borrowings on inventory financing arrangements of $2.2 million;
•
issued $250.0 million in aggregate principal amount of its 7.375% Senior Notes due 2019 for proceeds of $245.9 million;
•
borrowed $58.5 million under its revolving credit facility and issued other secured debt in an aggregate principal amount of $45.2
million for proceeds of $44.9 million;
•
acquired for treasury 572,700 shares of Common Stock for an aggregate purchase price of $43.3 million; and
•
acquired for treasury 33,876 shares of Common Stock for $2.6 million from Mr. Fabrikant as payment for payroll related tax
obligations arising from his December 2009 exercise of 52,500 stock options that were due to expire in February 2010. These shares
were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase
authorizations granted by SEACOR’s Board of Directors.
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Short and Long-Term Liquidity Requirements
Current economic conditions have continued to disrupt the credit and capital markets. To date, the Company’s liquidity has not been
materially impacted by the current credit environment and management does not expect that it will be materially impacted in the near-future. The
Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the
Company’s working capital requirements. In support of the Company’s capital expenditure program or other liquidity requirements, the
Company may use cash balances; sell securities; utilize construction reserve funds; sell assets; enter into sale and leaseback transactions for
equipment; borrow under its revolving credit facilities; issue debt, shares of Common Stock or common stock of its subsidiaries, preferred stock;
or a combination thereof.
The Company’s long-term liquidity is dependent upon its ability to generate operating profits sufficient to meet its requirements for
working capital, capital expenditures and a reasonable return on shareholders’ investment. The Company believes that earning such operating
profits will permit it to maintain its access to favorably priced debt, equity or off-balance sheet financing arrangements. Management will
continue to closely monitor the Company’s liquidity and the credit and capital markets.
Off-Balance Sheet Arrangements
On occasion, the Company and its partners will guarantee certain obligations on behalf of their joint ventures. As of December 31, 2011,
the Company had the following guarantees in place:
•
The Company is a guarantor of 50% of the outstanding debt for one of its domestic offshore marine joint ventures. The amount
guaranteed by the Company declines as principal payments are made and will terminate when the debt is repaid. The debt matures in
2015. As of December 31, 2011, the amount of the Company’s guarantee was $12.8 million.
•
The Company is a party to two international offshore marine joint ventures that obtained bank debt to finance the acquisition of
offshore support vessels from the Company. The debt is secured by, among other things, a first preferred mortgage on the vessels.
The bank also has the authority to require the parties to the joint ventures to fund uncalled capital commitments, as defined in the
joint ventures’ partnership agreements. In such event, the Company would be required to contribute its allocable share of uncalled
capital, which was $2.5 million, in the aggregate, as of December 31, 2011. The Company manages these vessels on behalf of the
joint ventures and guarantees the outstanding charter receivables of one of the joint ventures if a customer defaults in payment and
the Company either fails to take enforcement action against the defaulting customer or fails to assign its right of recovery against the
defaulting customer. As of December 31, 2011, the Company’s contingent guarantee of the joint venture’s outstanding charter
receivables was $0.9 million.
•
The Company guaranteed up to $0.5 million with respect to amounts owing pursuant to a vessel charter agreement between one of
the Company’s domestic offshore marine joint ventures and the owner of the chartered vessel. The amount of the Company’s
guarantee declines over the life of the charter and terminates in 2012.
•
The Company is guarantor of 50% of the outstanding debt for a joint venture that owns two offshore high speed catamaran crew
boats. The amount of the guarantees decline as principal payments are made and will terminate when the debt is repaid. The debt
matures in 2015. As of December 31, 2011, the amount of the Company’s guarantee was $9.8 million.
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Contractual Obligations and Commercial Commitments
The following table summarizes the Company’s contractual obligations and other commercial commitments and their aggregate maturities
as of December 31, 2011 (in thousands):
Total
$ ’000
Contractual Obligations:
Long-term Debt and Capital Lease Obligations (1)
Capital Purchase Obligations (2)
Operating Leases (3)
Purchase Obligations (4)
Other (5)
Other Commercial Commitments:
Joint Venture Guarantees (6)
Letters of Credit
Payments Due By Period
Less than
1 Year
1-3 Years
3-5 Years
$ ’000
$ ’000
$ ’000
After
5 Years
$ ’000
1,307,125
312,535
309,093
302,219
5,838
2,236,810
91,300
199,329
44,564
301,595
3,762
640,550
456,661
105,367
78,388
624
1,265
642,305
373,933
7,839
58,685
—
516
440,973
385,231
—
127,456
—
295
512,982
26,540
62,046
88,586
2,325,396
4,465
37,396
41,861
682,411
13,400
24,650
38,050
680,355
8,675
—
8,675
449,648
—
—
—
512,982
(1)
Maturities of the Company’s borrowings and interest payments pursuant to such borrowings are based on contractual terms with the exception of the Company’s revolving credit
facilities. The Company has entered into interest rate swap agreements related to certain borrowings under the SEACOR Revolving Credit Facility whereby it has converted its variable
rate borrowings into fixed rate borrowings. For purposes of this table, the Company has assumed the fixed rates of interest in calculating its obligations. Additionally, the Company has
excluded $176.5 million, in principal amount, of its 5.875% Senior Notes due in 2012 from “Less than 1 Year” as the Company has the ability and current intent to repay the outstanding
balance by drawing on the SEACOR Revolving Credit Facility, which matures in 2013.
(2)
Capital purchase obligations represent commitments for the purchase of property and equipment. Of the total unfunded capital commitments, $43.6 million may be terminated without
further liability other than the payment of liquidated damages of $1.4 million. These commitments are not recorded as liabilities on the Company’s consolidated balance sheet as of
December 31, 2011 as the Company has not yet received the goods or taken title to the property.
(3)
Operating leases primarily include leases of vessels, helicopters, barges, tankers and other property that have a remaining term in excess of one year.
(4)
Purchase obligations primarily include future commodity purchase commitments for Commodity Trading and Logistics as of December 31, 2011. These commitments are for goods and
services to be acquired in the ordinary course of business and are fulfilled by the Company’s vendors within a short period of time.
(5)
Other primarily includes deferred compensation arrangements, refundable deposits and statutorily defined severance obligations.
(6)
See “Off-Balance Sheet Arrangements” above.
Effects of Inflation
The Company’s operations expose it to the effects of inflation. In the event that inflation becomes a significant factor in the world
economy, inflationary pressures could result in increased operating and financing costs.
Contingencies
On August 19, 2011, the Company granted two fixed price purchase options to an unrelated third party to acquire up to 25% of the
outstanding common stock of O’Brien’s Response Management Inc., a component of
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the Environmental Services business segment. The first option to acquire a 12.5% interest may be exercised beginning August 19, 2012 through
August 19, 2014. If the first option is exercised, the second option to acquire an additional 12.5% may be exercised beginning August 19, 2013
through August 19, 2015.
new allegations in the Amended Complaint. Following the completion of such limited discovery, on February 11, 2011, the Defendants filed a
motion for summary judgment to dismiss the Amended Complaint with prejudice. On June 23, 2011, the Court granted summary judgment for
the Defendants. On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit. On August 9, 2011,
Defendants moved for certain excessive costs, expenses, and attorneys’ fees under 28 U.S.C. § 1927. That motion is fully briefed and a decision
is pending. On October 11, 2011, the plaintiffs filed their opening appeal brief with the U.S. Court of Appeals for the Third Circuit. That motion
is fully briefed and oral argument is calendared for March 20, 2012. The Company is unable to estimate the potential exposure, if any, resulting
from these claims but believes they are without merit and will continue to vigorously defend the action.
aboard the semi-submersible drilling rig, the Deepwater Horizon , were negligent in their efforts to save lives and put out the fire and contributed
which they assert, among other theories, that
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Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of
remediation, containment and response services by O’Brien’s Response Management Inc. (“O’Brien’s), a subsidiary of SEACOR. The action
now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all
individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly
experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal. Pursuant to contractual
agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend
O’Brien’s in connection with the Wunstell Action and claims asserted in the MDL.
and denied in part the motion to dismiss that O’Brien’s and NRC had filed (an amended decision was issued on October 4, 2011 that corrected
several grammatical errors and non-substantive oversights in the original order). Although the Court refused to dismiss the referenced master
complaint in its entirety at that time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that
O’Brien’s and NRC advanced and has directed O’Brien’s and NRC to (i) conduct limited discovery to develop evidence to support those
arguments and (ii) then re-assert the arguments. A schedule for such limited discovery and future motion practice has been established by the
Court and currently contemplates that O’Brien’s and NRC will file motions re-asserting their derivative immunity and implied preemption
arguments on May 18, 2012. The Court did, however, dismiss all state-law claims and certain other claims that had been asserted in the
referenced master complaint, and dismissed the claims of all plaintiffs that have failed to allege a legally-sufficient injury. Finally, the Court
stated that the plaintiffs could file an amended master complaint and the plaintiffs have indicated that they intend to do so. In addition to the
indemnity provided to O’Brien’s, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to
certain potential limitations, to indemnify and defend O’Brien’s and NRC in connection with these claims in the MDL.
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change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a
During the year ended December 31, 2010, the Company received notice from the IRS of $12.6 million in proposed penalties regarding
Marine Transportation Services’ informational excise tax filings for prior years. In February 2012, the Company settled the matter with the IRS
with no material effect on the Company’s consolidated financial position or its results of operations.
During the year ended December 31, 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal
Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required
importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed
assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial
position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels whose owner would be responsible to
reimburse any potential payment.
Related Party Transactions
The Company manages barge pools as part of its Inland River Services segment. Pursuant to the pooling agreements, operating revenues
and expenses of participating barges are combined and the net results are allocated on a pro-rata basis based on the number of barge days
contributed by each participant. Mr. Charles Fabrikant, the Executive Chairman of SEACOR, companies controlled by Mr. Fabrikant, and trusts
for the benefit of Mr. Fabrikant’s two children, own barges that participate in the barge pools managed by the Company. Mr. Fabrikant and his
affiliates were participants in the barge pools prior to the acquisition of SCF Marine Inc. by SEACOR in 2000. In the years ended December 31,
2011, 2010 and 2009, Mr. Fabrikant and his affiliates earned $1.2 million, $1.1 million and $1.0 million, respectively, of net barge pool results
(after payment of $0.1 million, $0.1 million and $0.1 million, respectively, in management fees to the Company). As of December 31, 2011 and
2010, the Company owed Mr. Fabrikant and his affiliates $0.4 million and $0.5 million, respectively, for undistributed net barge pool results.
Mr. Fabrikant and his affiliates participate in the barge pools on the same terms and conditions as other pool participants who are unrelated to the
Company.
Mr. Fabrikant is also a director of Diamond Offshore Drilling, Inc. (“Diamond”), which is also a customer of the Company. The total
amount earned from business conducted with Diamond did not exceed $5.0 million in any of the years ended December 31, 2011, 2010 or 2009.
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Critical Accounting Policies and Estimates
General. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Such estimates include those related to deferred revenues, allowance for doubtful accounts, useful lives of property and equipment,
impairments, income tax provisions and certain accrued liabilities. Actual results could differ from those estimates and those differences may be
material.
Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and
earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed
or determinable, and collectability is reasonably assured. Revenue that does not meet this criteria is deferred until the criteria are met.
The Company’s Offshore Marine Services segment earns and recognizes revenues primarily from the time charter and bareboat charter of
vessels to customers based upon daily rates of hire. Under a time charter, Offshore Marine Services provides a vessel to a customer and is
responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, Offshore Marine Services provides the vessel to the
customer and the customer assumes responsibility for all operating expenses and risk of operation. Vessel charters may range from several days
to several years. Revenues from time charters and bareboat charters are recorded and recognized as services are provided. In the U.S. Gulf of
Mexico, time charter durations and rates are typically established in the context of master service agreements, which govern the terms and
conditions of charter.
The Company’s Aviation Services segment charters the majority of its helicopters through master service agreements, subscription
agreements, day-to-day charter arrangements and contract-leases. Master service agreements and subscription agreements require incremental
payments above a fixed monthly fee based on hours flown. These agreements have fixed terms ranging from one month to five years and
generally may be cancelled upon 30-days notice. Day-to-day charter arrangements call for either a combination of a daily fixed fee plus a charge
based on hours flown or an hourly rate. Services provided under contract-leases can include only the equipment, or can include the equipment,
logistical and maintenance support, insurance and personnel, or a combination thereof. Fixed monthly fee revenues are recognized ratably over
the contract term. Usage or hourly based revenues are recognized as hours are flown. Aviation Services’ air medical services are provided under
contracts with hospitals that typically include either a fixed monthly and hourly rate structure or a fee per completed flight. Fixed monthly
revenues are recognized ratably over the month while per hour or per flight based revenues are recognized as hours are flown or flights are
completed. Most contracts with hospitals are longer term, but offer either party the ability to terminate with less than six months notice. Aviation
Services operates some air medical contracts pursuant to which it collects a fee per flight, either from a hospital or insurance company. With
respect to flightseeing activities, Aviation Services allocates block space to cruise lines and sells seats directly to customers with revenues
recognized as the services are performed. Aviation Services’ fixed based operation sells fuel an ad hoc basis and those sales are recognized at the
time of fuel delivery. Training revenues are charged at a set rate per training course and include instructors, training materials and flight or flight
simulator time, as applicable. Training revenues are recognized as services are provided.
The Company’s Inland River Services segment earns revenues primarily from voyage affreightment contracts whereby customers are
charged an established rate per ton to transport cargo from point to point. Revenues from voyage affreightment contracts are generally
recognized over the progress of the voyage while the related costs are expensed as incurred. Certain of Inland River Services’ barges are
operated in barge pools with other barges owned by third parties from whom Inland River Services earns and recognizes a management fee as
the services are rendered. Pursuant to the pooling agreements, operating revenues and expenses of participating barges are combined and the net
results are allocated on a pro-rata basis based on the number of barge days contributed by each participant. In addition, revenues are earned from
equipment chartered to third parties and from the storage and demurrage of cargos associated with affreightment activities. In both of these
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cases, revenues are recognized as services are rendered. Inland River Services’ tank farm and handling facility earns revenues through rental and
throughput charges. Rental revenues are recognized ratably over the rental period while throughput charges are recognized as product volume
moves through the facility.
The Company’s Marine Transportation Services segment earns revenue from the time charter, bareboat charter and voyage charter of
vessels, contracts of affreightment and ship management agreements with vessel owners. Under a time charter, Marine Transportation Services
provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, Marine
Transportation Services provides the vessel to a customer and the customer assumes responsibility for all operating expenses and risk of
operation. Revenues from time charters and bareboat charters are recognized as services are provided. Voyage contracts are contracts to carry
cargos on a single voyage basis regardless of time to complete. Contracts of affreightment are contracts for cargos that are committed on a multivoyage basis for various periods of time with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per
ton. Revenues for voyage contracts and contracts of affreightment are recognized over the progress of the voyage while the related costs are
expensed as incurred. Ship management agreements typically provide for technical services over a specified period of time, typically a year or
more. Revenues from ship management agreements are recognized ratably over the service period.
The Company’s Environmental Services segment earns revenues primarily from emergency response, retainer, consulting and training,
project management and remediation services. Emergency response revenues are recognized as services are provided and are dependent on the
magnitude and number of individual responses. Retainer agreements with vessel owners generally range from one to three years while retainer
agreements with facility owners can be as long as ten years. Such retainer fees are generally recognized ratably over the term of the contract.
Consulting and training services fees are recognized as the services are provided based on the contract terms. Project management and
remediation services are provided on a time and material basis with revenues recognized as the services are provided or on a fixed fee basis with
revenues and expenses recognized upon completion of the contract.
The Company’s Commodity Trading and Logistics segment earns revenues from the sale of rice, sugar and renewable fuels (primarily
ethanol), the rental of tank storage, and through voyage affreightment contracts on leased-in liquid tank barges and towboats. Revenues from
rice, sugar and renewable fuel sales are recorded when title transfers to the buyer, typically when cash is received. Revenues from the rental of
tank storage are recognized ratably over the lease periods. Revenues from voyage affreightment contracts are generally recognized over the
progress of the voyage while the related costs are expensed as incurred.
Trade Receivables. Customers of Offshore Marine Services, Aviation Services and Marine Transportation Services are primarily major
and independent oil and gas exploration and production companies. Customers of Inland River Services are primarily major agricultural and
industrial companies based within the United States. Oil spill, emergency response and remediation services are provided by Environmental
Services to domestic and international shippers, major oil companies, independent exploration and production companies, pipeline and
transportation companies, power generating operators, industrial companies, airports and state and local government agencies. Customers of
Commodity Trading and Logistics include major agricultural and industrial companies, major and independent oil and gas production
companies, foreign governments and local distributors. All customers are granted credit on a short-term basis and related credit risks are
considered minimal. The Company routinely reviews its trade receivables and makes provisions for probable doubtful accounts; however, those
provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed
uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.
Derivative Instruments. The Company accounts for derivatives through the use of a fair value concept whereby all of the Company’s
derivative positions are stated at fair value in the accompanying consolidated balance sheets. Realized and unrealized gains and losses on
derivatives not designated as hedges are reported in the accompanying consolidated statements of income as derivative gains (losses), net.
Realized and unrealized
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gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in the fair value of the
underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying consolidated statements of
income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a
component of other comprehensive income in the accompanying consolidated statement of changes in equity to the extent they are effective and
reclassified into earnings on the same line item associated with the hedged transaction and in the same period the hedged transaction affects
earnings. Any ineffective portions of cash flow hedges are reported in the accompanying consolidated statements of income as derivative gains
(losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are entered into by the Company’s
equity method investees are also reported as a component of the Company’s other comprehensive income (loss) in proportion to the Company’s
ownership percentage in the investee, with reclassifications and ineffective portions being included in equity in earnings of 50% or less owned
companies, net of tax, in the accompanying consolidated statements of income.
Inventories. Inventories are stated at the lower of cost (using the first-in, first-out and average cost methods) or market. Inventories consist
primarily of fuel and fuel oil in the Company’s Offshore Marine Services, Marine Transportation Services and Inland River Services segments,
spare parts and fuel in the Company’s Aviation Services segment, and ethanol in the Company’s Commodity Trading and Logistics segment.
The Company records write-downs, as needed, to adjust the carrying amount of inventories to the lower of cost or market.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset
to an estimated salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being
placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or
similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which
case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of December 31, 2011, the estimated useful life (in years) of each of the Company’s major classes of new equipment was as follows:
Offshore support vessels
Helicopters (1)
Inland river dry cargo and deck barges
U.S.-flag tankers
RORO vessels
Harbor and offshore tugs
Ocean liquid tank barges
(1)
20
15
20
25
25
25
20
25
25
Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to improvements in new
aircraft models that continue to increase their long-term value and make them viable for operation over a longer period of time. For the six months ended December 31, 2011, the change
in estimate increased operating income by $7.6 million, net income by $4.9 million and basic and diluted earnings per share by $0.23.
Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and
equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the commercial characteristics of
equipment as well as major renewals and improvements to other properties are capitalized.
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models under programs known as “power-by-hour” maintenance contracts. These programs require the Company to pay for maintenance service
ratably over the contract period, typically based on actual flight hours. Power-by-hour providers generally bill monthly based on hours flown in
the prior month, the costs being expensed as incurred. In the event the Company places a helicopter in a program after a maintenance period has
begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event. The buy-in charge is
normally recorded as a pre-paid expense and amortized as an operating expense over the remaining power-by-hour contract period. If a
helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, the Company may be able to
recover part of its payments to the power-by-hour provider, in which case the Company records a reduction to operating expenses when it
receives the refund.
Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including
intangible assets, when indicators of impairment are present. If the carrying values of the assets are not recoverable, as determined by the
estimated undiscounted cash flows, the carrying values of the assets are reduced to fair value. Generally, fair value is determined using valuation
techniques, such as expected discounted cash flows or appraisals, as appropriate.
Impairment of 50% or Less Owned Companies. The Company performs regular reviews of each investee’s financial condition, the
business outlook for its products and services, and its present and projected results and cash flows. When an investee has experienced consistent
declines in financial performance or difficulties in raising capital to continue operations, and when the Company expects the decline to be otherthan-temporary, the investment is written down to fair value. Actual results may vary from estimates due to the uncertainty regarding the
projected financial performance of investees, the severity and expected duration of declines in value, and the available liquidity in the capital
markets to support the continuing operations of the investees in which the Company has investments.
Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and
intangible assets acquired. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of
impairment develop between annual impairment tests. The Company’s impairment review process compares the fair value of the reporting unit
to its carrying value, including the goodwill related to the reporting unit. To determine the fair value of the reporting unit, the Company uses a
discounted future cash flow approach that uses estimates for revenues, costs and appropriate discount rates, among others. These estimates are
reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business planning
and forecasting process. While the Company believes its estimates and assumptions are reasonable, variations from those estimates could
produce materially different results.
Business Combinations. The Company recognizes, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities
assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. Shares issued in consideration
for a business combination, contingent consideration arrangements and pre-acquisition loss and gain contingencies are all measured and recorded
at their acquisition-date fair value. Subsequent changes to fair value of contingent consideration arrangements are generally reflected in earnings.
Any in-process research and development assets acquired are capitalized as are certain acquisition-related restructuring costs if the criteria
related to exit or disposal cost obligations are met as of the acquisition date. Acquisition-related transaction costs are expensed as incurred and
any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals are recorded as an adjustment to income tax
expense. The operating results of entities acquired are included in the accompanying consolidated statements of income from the date of
acquisition.
Income Taxes. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the
book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or
liabilities are provided using the enacted tax rates
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expected to apply to taxable income in the periods in which they are expected to be settled or realized. Interest and penalties relating to uncertain
tax positions are recognized in interest expense and administrative and general, respectively, in the accompanying consolidated statements of
income. The Company records a valuation allowance to reduce its deferred tax assets if it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
The Company has entered into and settled positions in euro based forward currency exchange contracts designated as fair value hedges for
capital purchase commitments in U.S. dollars. As of December 31, 2011, there were no forward currency exchange contracts designated as fair
value hedges as all of the contracts matured or were dedesignated and liquidated during the year ended December 31, 2011. As of December 31,
2011, the Company had capital purchase commitments of €72.6 million ($94.1 million). An adverse change of 10% in the underlying foreign
currency exchange rates would increase the U.S. dollar equivalent of these non-hedged purchase commitments by $9.4 million.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies that are
not designated as fair value hedges. As of December 31, 2011, the outstanding forward currency exchange contracts translated into a net
purchase of foreign currencies with an aggregate U.S. dollar equivalent of $56.4 million. These contracts enable the Company to buy currencies
in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the
Company’s business conducted in Europe, Africa, Brazil, Mexico, Central and South America, the Middle East and Asia. The Company
generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months. An adverse change of 10% in the
underlying foreign currency exchange rates would reduce income by $3.6 million, net of tax.
As of December 31, 2011, the Company maintained cash balances of €7.9 million. An adverse change of 10% in the underlying foreign
currency exchange rate on euro denominated cash balances would reduce net income by $0.6 million, net of tax. Additionally, as of
December 31, 2011, the Company advanced intercompany loans of £9.1 million ($14.0 million) to a United Kingdom subsidiary. A 10%
weakening in the exchange rate of the U.S. dollar against the pound sterling as of December 31, 2011 would result in foreign currency losses of
$0.9 million, net of tax.
The Company has foreign currency exchange risks related to its operations where its functional currency is the pound sterling, primarily
related to vessel operations that are conducted from ports located in the United Kingdom. Net consolidated assets of £35.5 million ($54.8
million) are included in the Company’s consolidated balance sheets as of December 31, 2011. A 10% weakening in the exchange rate of the
pound sterling against the U.S. dollar as of December 31, 2011, would increase other comprehensive loss by $3.6 million, net of tax, due to
translation. In addition, the Company has long-term debt of €22.6 million (£18.9 million). A 10% weakening in the exchange rate of the Euro
against the pound sterling as of December 31, 2011 would result in foreign currency losses of $1.9 million, net of tax. SEACOR also provided
$13.9 million (£9.0 million) U.S. dollar denominated loans to a United Kingdom subsidiary. A 10% weakening in the exchange rate of the pound
sterling against the U.S. dollar as of December 31, 2011 would result in foreign currency losses of $0.9 million, net of tax.
As of December 31, 2011, the Company held marketable securities with a fair value of $66.9 million, including $45.4 million in fixed
income investments consisting of corporate debt securities, municipal bonds, and foreign government bonds, and $21.5 million in equity
securities. As of December 31, 2010, the Company held marketable securities with a fair value of $147.4 million, including $94.7 million in
fixed income investments consisting of corporate debt securities, municipal bonds, and foreign government bonds, and $52.7 million in equity
securities. From time to time, the Company may increase its level of investment in fixed income securities including U.S. government bonds,
foreign government bonds, state and municipal bonds, and corporate notes
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with maturities ranging from a few months to many years. The fair value of such investments fluctuates based on market interest rates and the
creditworthiness of the issuers of the securities. When making substantial investments in fixed income securities, the Company manages its risk
associated with these investments by analyzing the creditworthiness of issuers and utilizing other techniques that may include maintaining a
ladder of maturities. The Company’s investment in equity securities primarily includes positions in energy, marine, transportation and other
related businesses. As of December 31, 2011, a 10% decline in the value of the Company’s investments in marketable securities would reduce
income by $4.3 million, net of tax.
The Company held positions in short sales of marketable equity securities with a fair value of $22.6 million and $36.1 million as of
December 31, 2011 and 2010, respectively. The Company’s short sales of marketable equity securities primarily include positions in energy,
marine, transportation and other related businesses. A 10% increase in the value of equity securities underlying the short sale positions of the
Company as of December 31, 2011 would reduce income by $1.5 million, net of tax.
The Company held positions in publicly traded equity options that may convey to the Company a right or obligation to engage in a future
transaction with respect to the underlying equity security. The Company’s investment in equity options primarily includes positions in energy,
marine, transportation and other related businesses. These investments have short-term maturities and their market values fluctuate based on
changes in the price and volatility of the underlying security, the strike price of the option and the time to expiration. As of December 31, 2010,
the Company had a liability of $0.8 million having marked to market its positions in these publicly traded equity options.
The Company’s outstanding debt is primarily in fixed interest rate instruments. Although the fair value of these debt instruments will vary
with changes in interest rates, the Company’s operations are not significantly affected by interest rate fluctuations. As of December 31, 2011, the
Company had $175.0 million of variable rate borrowings, based on LIBOR, under the SEACOR Revolving Credit Facility. During the year
ended December 31, 2011, the Company held various interest rate swap agreements, designated as cash flow hedges, to fix the interest rate on
$125.0 million of these borrowings at an average rate of 3.1%. The remaining $50 million of variable rate borrowings not fixed by interest rate
swaps were repaid in January 2012.
Era Group Inc., a subsidiary of the Company, had $252.0 million of variable rate borrowings, based on LIBOR under the Era Group Inc.
Senior Secured Revolving Credit Facility established on December 22, 2011. The borrowing rate at December 31, 2011 was 3.2%. A 10%
increase in LIBOR would result in additional annual interest expense of $0.1 million, net of tax.
As of December 31, 2011, the Company had other variable rate debt instruments (due 2012 through 2018) totaling $62.3 million that call
for the Company to pay interest based on LIBOR or Euribor plus applicable margins. The interest rates reset either monthly or quarterly. One
instrument is subject to a floor of 4.5%. As of December 31, 2011, the average interest rate on these borrowings was 4.08%.
As of December 31, 2011 the Company had interest rate swap agreements, other than those designated as cash flow hedges mentioned
above, with an amortized notional value of $64.0 million. These agreements call for the Company to pay a fixed interest rate ranging from 1.79%
to 2.59% and receive interest payments based on LIBOR. As of December 31, 2011, the Company had a liability of $2.1 million having marked
to market its positions in these interest rate swap agreements.
The Company enters and settles positions in various exchange and non-exchange traded commodity swap, option and future contracts. In
the Company’s commodity trading and logistics business, fixed price future purchase and sale contracts of ethanol and sugar are included in the
Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sales
contracts as well as its inventory balances from market changes. As of December 31, 2011, the net market exposure to ethanol and sugar under
these positions was not material. The Company also enters into exchange traded
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positions (primarily natural gas, crude oil, gasoline, ethanol and sugar) to provide value to the Company should there be a sustained decline in
the price of commodities that could lead to a reduction in the market values and cash flows of the Company’s offshore marine and inland river
businesses. As of December 31, 2011, these positions were not material. As of December 31, 2011, the fair value of these exchange and nonexchange commodity contracts was an asset of $1.6 million, net.
The Company enters and settles various positions in U.S. treasury notes and bonds through rate locks, futures or options on futures tied to
U.S. treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. treasury notes and
bonds decline, leading to generally higher interest rates, which might lead to higher interest costs for the Company. As of December 31, 2011,
there were no positions outstanding.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes are included in Part IV of this Form 10-K and incorporated herein by reference.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness
of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)), as of December 31, 2011. Based on their evaluation, the Company’s principal executive officer and principal
financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2011.
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) that occurred during the three months ended December 31, 2011 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Set forth in Part IV of this Annual Report and incorporated herein by reference are: Management’s Report on Internal Control over
Financial Reporting and the Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be disclosed pursuant to this Item 10 is incorporated in its entirety herein by reference to the Company’s
definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last
fiscal year.
NYSE Annual Certification. The Chief Executive Officer of the Company has previously submitted to the NYSE the annual certification
required by Section 303A.12(a) of the NYSE Listed Company Manual, and there were no qualifications to such certification. SEACOR Holdings
Inc. has filed the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of
2002 with the SEC as exhibits to this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required to be disclosed pursuant to this Item 11 is incorporated in its entirety herein by reference to the “Compensation
Disclosure and Analysis” and “Information Relating to the Board of Directors and Committees Thereof” portions of the Company’s definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required to be disclosed pursuant to this Item 12 is incorporated in its entirety herein by reference to the Security
Ownership of Certain Beneficial Owners and Management portion of the Company’s definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required to be disclosed pursuant to this Item 13 is incorporated in its entirety herein by reference to the Certain
Relationships and Related Transactions portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required to be disclosed pursuant to this Item 14 is incorporated in its entirety herein by reference to the Ratification or
Appointment of Independent Auditors portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company’s last fiscal year.
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PART IV
ITEM 15.
(a)
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement Schedules – See Index to Consolidated Financial Statements and Financial
Statement Schedule of this Form 10-K
3. Exhibits
Exhibit
Number
Description
3.1*
Restated Certificate of Incorporation of SEACOR Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 (a) of the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997 and filed with the Commission on
May 15, 1997).
3.2*
Certificate of Amendment to the Restated Certificate of Incorporation of SEACOR Holdings, Inc. (incorporated herein by
reference to Exhibit 3.1(b) of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997 and
filed with the Commission on May 15, 1997).
3.3*
Certificate of Amendment to the Restated Certificate of Incorporation of SEACOR Holdings Inc. (incorporated herein by
reference to Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No. 333-126613) filed with the Commission
on July 15, 2005).
3.4*
Fourth Amended and Restated Bylaws of SEACOR Holdings Inc. (incorporated by reference to Exhibit 3.1 of the Company’s
Current Report on Form 8-K filed with the Commission on September 20, 2010).
4.1*
Form of Indenture, dated as of January 10, 2001, among SEACOR SMIT Inc. and U.S. Bank Trust National Association as
trustee (incorporated herein by reference to Exhibit 4.2 to Amendment No. 1 of the Company’s Registration Statement on
Form S-3/A (No. 333-53326) filed with the Commission on January 18, 2001).
4.2*
4.3*
First Supplemental Indenture, dated as of September 27, 2002, to Indenture, dated as of January 10, 2001, between SEACOR
SMIT Inc. and U.S. Bank National Association (incorporated herein by reference to Exhibit 4.1 of the Company’s Current
Report on Form 8-K filed with Commission on October 1, 2002).
4.4*
Indenture, dated as of August 5, 2003, among Seabulk International, Inc., the Guarantors named therein, and Wachovia Bank,
National Association, as Trustee (including forms of notes) (incorporated herein by reference to Exhibit 4.7 of Seabulk
International, Inc.’s Registration Statement on Form S-4 (No. 333-110138) filed with the Commission on October 31, 2003).
4.5*
Supplemental Indenture, dated September 24, 2009, between SEACOR Holdings Inc. and U.S. Bank National Association, as
trustee (including therein Form of Global Note 7.375% Senior Notes Due 2019) (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed with Commission on September 24, 2009).
10.1*+
SEACOR Holdings Inc. 1996 Share Incentive Plan (incorporated herein by reference to Annex A of the Company’s Proxy
Statement on DEF 14-A filed with the Commission on March 18, 1996).
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Exhibit
Number
Description
10.2*+
SEACOR SMIT Inc. 2000 Stock Option Plan for Non-Employee Directors (incorporated herein by reference to Exhibit 10.1
of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2000 and filed with the Commission on
August 14, 2000).
10.3*
Form of Management Agreement (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on
Form 8-K filed with the Commission on December 24, 1996).
10.4*
License Agreement, dated December 19, 1996, between SEACOR Holdings Inc., certain subsidiaries of SEACOR
Holdings Inc. and Smit Intenationale N.V. (incorporated herein by reference to Exhibit 10.6 of the Company’s Current Report
on Form 8-K filed with the Commission on December 24, 1996).
10.5*+
Form of Type A Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.35 of the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed with the Commission on March 30, 2000).
10.6*+
Form of Type B Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.36 of the Company’s
10.7*+
Form of Option Agreement for Officers and Key Employees Pursuant to the SEACOR SMIT Inc. 1996 Share Incentive Plan
(incorporated herein by reference to Exhibit 10.37 of the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 filed with the Commission on March 30, 2000).
10.8*+
SEACOR SMIT Inc. 2003 Non-Employee Director Share Incentive Plan (incorporated herein by reference to Exhibit 10.25 of
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Commission on
March 15, 2004).
10.9*+
SEACOR SMIT Inc. 2003 Share Incentive Plan (incorporated herein by reference to Exhibit 10.26 of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Commission on March 15, 2004).
10.10*+
Form of Option Agreement for Officers and Key Employees Pursuant to the SEACOR Holdings Inc. 2003 Share Incentive
Plan (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the
Commission on November 24, 2004).
10.11*+
Form of Restricted Stock Grant Agreement under the Company’s 2003 Share Incentive Plan (incorporated herein by reference
to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Commission on November 24, 2004).
10.12*
Form of Warrant Exchange Agreement (incorporated herein by reference to Exhibit 10.32 of the Company’s Registration
Statement (No. 333-124232) on Form S-4/A filed with the Commission on May 25, 2005).
10.13*+
SEACOR Nonqualified Deferred Compensation Plan, dated as of October 15, 2005 (incorporated herein by reference to
Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the Commission on October 28, 2005).
10.14*
Revolving Credit Facility Agreement, dated November 3, 2006, between SEACOR Holdings Inc. as Borrower, and DNB Nor,
ASA, as Agent (incorporated herein by reference to Exhibit 10.1 of SEACOR’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2006 filed with the Commission on November 7, 2006).
10.15*+
SEACOR SMIT Inc. 2000 Employee Stock Purchase Plan, as amended February 14, 2001 (incorporated herein by reference
to Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No. 333-56714) filed with the Commission on March 8,
2001).
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Exhibit
Number
Description
10.16*+
Statement on DEF 14-A filed with the Commission on April 13, 2007).
10.17*
Amendment No. 1 to Revolving Credit Facility Agreement dated as of November 3, 2006 (incorporated herein by reference to
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on July 10, 2007).
10.18*+
Form of Non-Employee Director Annual Share Incentive Grant Agreement (incorporated herein by reference to Exhibit 10.1 of
the Company’s Current Report on Form 8-K filed with the Commission on May 8, 2008).
10.19*+
Form of Stock Option Grant Agreement for Officers and Key Employees Pursuant to the SEACOR Holdings Inc. 2007 Share
Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the
Commission on May 8, 2008).
10.20*+
Form of Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report
on Form 8-K filed with the Commission on May 8, 2008).
10.21*+
SEACOR Holdings Inc. 2009 Employee Stock Purchase Plan effective March 11, 2009 (incorporated herein by reference to
Appendix A of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 7, 2009).
10.22*+
SEACOR Holdings Inc. 2007 Share Incentive Plan (as amended through March 11, 2009) (incorporated herein by reference to
Appendix B of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 7, 2009).
10.23*+
SEACOR Holdings Inc. Management Incentive Plan (incorporated herein by reference to Appendix C of the Company’s Proxy
10.24*+
Form of Restricted Stock Grant Agreement Pursuant to the SEACOR Holdings Inc. Amended 2007 Share Incentive Plan
December 31, 2010 filed with the Commission on February 25, 2011).
10.25
Senior Secured Revolving Credit Facility Agreement by and among (1) Era Group Inc., (2) Wells Fargo Securities, LLC, JP
Morgan Chase Bank, N.A., Deutsche Bank Securities Inc., Suntrust Robinson Humphrey, Inc. and Regions Bank, as mandated
lead arrangers, (3) Wells Fargo Securities, LLC, JP Morgan Chase Bank, N.A., Deutsche Bank Securities Inc., Suntrust
Robinson Humphrey, Inc. and Regions Bank, as bookrunners, (4) Wells Fargo Bank, National Association (“Wells Fargo”), as
administrative agent, (5) JP Morgan Chase Bank, N.A., as syndication agent, (6) Deutsche Bank Securities Inc., Suntrust Bank
and Regions Bank, as co-documentation agents, (7) Compass Bank, Whitney Bank, Goldman Sachs Bank USA, Comerica
Bank and The Northern Trust Company, as managing agents, (8) Wells Fargo, as swing line bank, and (9) banks and financial
institutions whose names and addresses are set out in Schedule A to the agreement.
10.26+
Compensation Arrangements for the Executive Officers.
10.27+
Compensation of Non-Employee Directors.
21.1
List of Registrant’s Subsidiaries.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification by the Principal Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.2
Certification by the Principal Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1
Certification by the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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Exhibit
Number
32.2
Description
Certification by the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
101.INS**
XBRL instance Document
101.SCH**
XBRL Taxonomy Extension Schema
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase
101.DEF**
XBRL Taxonomy Extension Definition Linkbase
101.LAB**
XBRL Taxonomy Extension Label Linkbase
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase
*
Incorporated herein by reference as indicated.
+
Management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 15 (b) of the rules governing the preparation of this Annual Report on
Form 10-K.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on
Form 10-K for the fiscal year ended December 31, 2011, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto
duly authorized.
SEACOR Holdings Inc. (Registrant)
By: / S / R ICHARD R YAN
Richard Ryan, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: February 24, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signer
/ S / R ICHARD R YAN
Richard Ryan
Title
Date
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 24, 2012
Vice President and
Chief Accounting Officer (Principal Accounting Officer)
February 24, 2012
Executive Chairman and Director
(Principal Executive Officer)
February 24, 2012
President, Chief Executive Officer and Director
February 24, 2012
/ S / P IERRE D E D EMANDOLX
Pierre De Demandolx
Director
February 24, 2012
/ S / R ICHARD M. F AIRBANKS
Richard M. Fairbanks
Director
February 24, 2012
/ S / B LAINE V. F OGG
Blaine V. Fogg
Director
February 24, 2012
/ S / J OHN C. H ADJIPATERAS
John C. Hadjipateras
Director
February 24, 2012
/ S / A NDREW R. M ORSE
Andrew R. Morse
Director
February 24, 2012
/ S / C HRISTOPHER R EGAN
Christopher Regan
Director
February 24, 2012
/ S / S TEVEN W EBSTER
Steven Webster
Director
February 24, 2012
/ S / S TEVEN J. W ISCH
Steven J. Wisch
Director
February 24, 2012
/ S / M ATTHEW C ENAC
Matthew Cenac
/ S / C HARLES F ABRIKANT
Charles Fabrikant
/ S / O IVIND L ORENTZEN
Oivind Lorentzen
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
Management’s Report on Internal Control Over Financial Reporting
110
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
111
Report of Independent Registered Public Accounting Firm
112
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2011 and 2010
113
Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009
114
Consolidated Statements of Comprehensive Income for the years ended December 31, 2011, 2010 and 2009
115
Consolidated Statements of Changes in Equity for the years ended December 31, 2011, 2010 and 2009
116
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009
117
Notes to Consolidated Financial Statements
118
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2011, 2010 and 2009
168
Except for the Financial Statement Schedule set forth above, all other required schedules have been omitted since the information is either
included in the consolidated financial statements, not applicable or not required.
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
SEACOR Holdings Inc.’s (“SEACOR”) management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934).
Management conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2011 based on
the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included a review of the documentation surrounding SEACOR’s financial controls, an evaluation of the design effectiveness of
these controls, testing of the operating effectiveness of these controls and a conclusion on this evaluation. Although there are inherent limitations
in the effectiveness of any system of internal control over financial reporting – including the possibility of the circumvention or overriding of
controls – based on management’s evaluation, management has concluded that SEACOR’s internal control over financial reporting was effective
as of December 31, 2011. However, because of changes in conditions, it is important to note that internal control system effectiveness may vary
over time.
SEACOR’s internal control over financial reporting as of December 31, 2011 has been audited by Ernst & Young LLP, the independent
registered public accounting firm that has also audited SEACOR’s consolidated financial statements included in this Annual Report on Form 10K. Ernst & Young LLP’s report on SEACOR’s internal control over financial reporting is included elsewhere herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Stockholders and Board of Directors of SEACOR Holdings Inc.
We have audited SEACOR Holdings Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established
in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). SEACOR Holdings Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, SEACOR Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of SEACOR Holdings Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income,
comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2011 of SEACOR
Holdings Inc. and our report dated February 24, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Miami, Florida
February 24, 2012
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Stockholders and Board of Directors of SEACOR Holdings Inc.
We have audited the accompanying consolidated balance sheets of SEACOR Holdings Inc. (the Company) as of December 31, 2011 and
2010, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in
the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of SEACOR Holdings Inc. at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), SEACOR
Holdings Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2012
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Miami, Florida
February 24, 2012
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CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2011
2010
$ 467,601
21,281
66,898
$ 370,028
12,651
147,409
334,863
54,293
72,660
11,498
11,453
1,040,547
3,105,295
(919,223)
2,186,072
251,838
259,974
65,067
21,826
102,810
$3,928,134
450,912
72,448
67,498
5,442
18,414
1,144,802
2,803,754
(835,032)
1,968,722
182,387
323,885
61,779
21,169
57,645
$3,760,389
$
$
ASSETS
Current Assets:
Cash and cash equivalents
Restricted cash
Marketable securities
Receivables:
Trade, net of allowance for doubtful accounts of $3,652 and $4,212 in 2011 and 2010, respectively
Other
Inventories
Deferred income taxes
Prepaid expenses and other
Total current assets
Property and Equipment
Accumulated depreciation
Net property and equipment
Investments, at Equity, and Advances to 50% or Less Owned Companies
Construction Reserve Funds & Title XI Reserve Funds
Goodwill
Intangible Assets, Net
Other Assets, net of allowance for doubtful accounts of $1,830 in 2010
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt
Current portion of capital lease obligations
Accounts payable and accrued expenses
Accrued wages and benefits
Accrued interest
Accrued income taxes
Short sales of marketable securities
Accrued capital, repair and maintenance expenditures
Deferred revenues
Other current liabilities
Total current liabilities
Long-Term Debt
Capital Lease Obligations
Deferred Income Taxes
Deferred Gains and Other Liabilities
Total liabilities
Equity:
SEACOR Holdings Inc. stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding
Common stock, $.01 par value, 60,000,000 shares authorized; 36,444,439 and 36,110,719 shares issued in 2011 and 2010,
respectively
Additional paid-in capital
Retained earnings
Shares held in treasury of 15,511,323 and 14,711,211 in 2011 and 2010, respectively, at cost
Accumulated other comprehensive loss, net of tax
Noncontrolling interests in subsidiaries
Total equity
41,091
2,368
202,528
37,310
7,974
14,567
22,612
7,985
10,022
55,069
401,526
995,450
3,068
575,303
144,724
2,120,071
14,618
1,030
322,785
38,842
7,625
15,498
36,076
7,462
29,322
62,255
535,513
697,427
5,493
567,880
156,711
1,963,024
—
364
1,256,209
1,512,679
(971,687)
(7,958)
1,789,607
18,456
1,808,063
$3,928,134
—
361
1,225,296
1,471,623
(903,004)
(7,039)
1,787,237
10,128
1,797,365
$3,760,389
The accompanying notes are an integral part of these consolidated financial statements and should be read in conjunction herewith.
112
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CONSOLIDATED STATEMENTS OF INCOME
2011
Operating Revenues
Costs and Expenses:
Operating
2009
$ 2,141,942
$ 2,649,368
$ 1,711,338
1,708,187
187,547
156,824
2,052,558
33,950
123,334
1,930,227
192,518
163,490
2,286,235
45,238
408,371
1,185,096
161,998
160,092
1,507,186
27,675
231,827
Operating Income
Interest income
Interest expense
Debt extinguishment losses, net
Marketable security gains (losses), net
Other, net
Income Before Income Tax Expense (Benefit) and Equity in Earnings of 50% or
Less Owned Companies
Income Tax Expense (Benefit):
Current
Deferred
Income Before Equity in Earnings of 50% or Less Owned Companies
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
Net Income
Net Income attributable to Noncontrolling Interests in Subsidiaries
Basic Earnings Per Common Share of SEACOR Holdings Inc.
Diluted Earnings Per Common Share of SEACOR Holdings Inc.
Weighted Average Common Shares Outstanding:
Basic
Diluted
Special Cash Dividend Declared and Paid Per Common Share of SEACOR
Holdings Inc.
For the years ended December 31,
2010
$
$
$
13,756
(41,245)
(99)
(7,893)
(36,135)
816
860
(69,940)
8,882
(43,950)
(1,460)
(2,159)
6,205
(6,127)
3,717
(34,892)
4,466
(59,043)
(5,587)
24,059
10,961
8,087
244
(16,813)
53,394
373,479
215,014
28,420
(7,235)
21,185
32,209
9,941
42,150
1,094
41,056
1.94
1.91
151,045
(10,371)
140,674
232,805
13,179
245,984
1,260
244,724
11.43
11.25
19,487
63,005
82,492
132,522
12,581
145,103
1,293
143,810
7.21
6.57
$
$
$
21,119,461
21,466,843
$
—
$
$
$
21,402,441
21,757,217
$
15.00
19,950,702
23,388,168
$
—
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
2011
Net Income
Other Comprehensive Income (Loss):
Foreign currency translation adjustments
Reclassification of foreign currency translation adjustments to foreign currency gains
(losses), net
Derivative losses on cash flow hedges
Reclassification of derivative losses on cash flow hedges to interest expense or equity
in earnings of 50% or less owned companies
Other
Income tax (expense) benefit
Comprehensive Income
Comprehensive Income attributable to Noncontrolling Interests in Subsidiaries
Comprehensive Income attributable to SEACOR Holdings Inc.
2010
2009
$42,150
$245,984
$145,103
(1,089)
(1,447)
3,187
342
(3,419)
4
(7,589)
(124)
(1,507)
2,519
116
(1,531)
494
(1,037)
41,113
976
$40,137
3,390
(171)
(5,813)
2,034
(3,779)
242,205
1,260
$240,945
1,193
—
2,749
(964)
1,785
146,888
1,293
$145,595
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
Common
Year Ended December 31, 2008
Issuance of common stock:
Conversion of debt
Purchase of conversion option in convertible debt
Employee Stock Purchase Plan
Exercise of stock options
Director stock awards
Restricted stock and restricted stock units
Purchase of treasury shares
Purchase of conversion options in convertible debt, net of tax
Amortization of share awards
Cancellation of restricted stock
Purchase of subsidiary shares from noncontrolling interests
Acquisition of a subsidiary with noncontrolling interests
Disposition of subsidiary with noncontrolling interests
Dividends paid to noncontrolling interests
Net Income
Other comprehensive income
Special Cash Dividend
Issuance of noncontrolling interests
Net Income
Other comprehensive loss
Acquisition of a subsidiary with noncontrolling interests
Disposition of subsidiary with noncontrolling interests
Issuance of noncontrolling interests
Net Income
Stock
$
324
$
SEACOR Holdings Inc. Stockholders’ Equity
Accumulated
Other
Additional
Comprehensive
Treasury
Paid-in
Retained
Stock
Loss
Capital
Earnings
$ 956,457
$1,402,771
$(724,357) $
(5,045)
Non controlling
Interests in
Subsidiaries
$
12,078
27
2
—
1
—
2
—
—
—
—
—
—
—
—
—
—
356
205,631
11,513
—
4,064
374
(776)
—
(8,804)
12,993
571
—
—
—
—
—
—
1,182,023
—
—
—
—
—
—
—
—
—
—
—
—
—
—
143,810
—
1,546,581
—
—
2,361
—
—
(17)
(45,854)
—
—
(571)
—
—
—
—
—
—
(768,438)
—
3
—
2
—
—
—
—
—
—
—
—
—
361
—
21,561
319
1,951
—
—
19,254
181
7
—
—
—
—
1,225,296
—
—
—
—
(319,682)
—
—
—
—
—
—
244,724
—
1,471,623
2,552
—
—
131
—
(137,068)
—
(181)
—
—
—
—
—
(903,004)
—
—
—
—
(3,779)
(7,039)
(46)
1,410
(1,125)
1,260
—
10,128
2,552
21,564
319
2,084
(319,682)
(137,068)
19,254
—
(39)
1,410
(1,125)
245,984
(3,779)
1,797,365
—
1
—
2
—
—
—
—
—
—
—
—
—
—
364
—
8,776
363
123
—
21,589
365
(303)
—
—
—
—
—
—
$1,256,209
2,971
—
—
1
(71,290)
—
(365)
—
—
—
—
—
—
—
$(971,687)
—
—
—
—
—
—
—
—
—
—
—
—
—
(919)
(7,958)
—
—
—
—
—
—
—
(2,092)
10,284
(49)
1,853
(2,644)
1,094
(118)
18,456
2,971
8,777
363
126
(71,290)
21,589
—
(2,395)
10,284
(49)
1,853
(2,644)
42,150
(1,037)
$1,808,063
—
—
—
—
—
—
—
—
—
—
—
—
41,056
—
$1,512,679
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,785
(3,260)
—
—
—
—
—
—
—
—
—
—
(5,501)
3,043
(27)
(2,257)
1,293
—
8,629
Total
Equity
$1,642,228
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
$
205,658
11,515
2,361
4,065
374
(791)
(45,854)
(8,804)
12,993
—
(5,501)
3,043
(27)
(2,257)
145,103
1,785
1,965,891
115
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2011
2010
2009
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred gains on sale and leaseback transactions
Debt discount amortization, net
Bad debt expense (income)
Gains on asset dispositions and impairments, net
Debt extinguishment losses, net
Marketable security (gains) losses, net
Purchases of marketable securities
Proceeds from sale of marketable securities
Derivative (gains) losses, net
Cash settlements on derivative transactions, net
Foreign currency (gains) losses, net
Deferred income tax expense (benefit)
Equity in earnings of 50% or less owned companies, net of tax
Dividends received from 50% or less owned companies
Other, net
Changes in operating assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in prepaid expenses and other assets
Increase (decrease) in accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Proceeds from disposition of property and equipment
Cash settlements on derivative transactions, net
Investments in and advances to 50% or less owned companies
Return of investments and advances from 50% or less owned companies
Net advances on revolving credit line to 50% or less owned companies
Proceeds on sale of investments in 50% or less owned companies
(Advances) principal payments on third party notes receivable, net
Net (increase) decrease in restricted cash
Net (increase) decrease in construction reserve funds and title XI funds
Repayments on (investments in) leases, net
Business acquisitions, net of cash acquired
Cash disposed on sale of subsidiary, net of cash proceeds on sale
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Payments on long-term debt and capital lease obligations
Purchase of conversion option in convertible debt
Net borrowings (repayments) under inventory financing arrangements
Proceeds from issuance of long-term debt, net of offering costs
Special Cash Dividend
Common stock acquired for treasury
Proceeds and tax benefits from share award plans
Cash received from (dividends paid to) noncontrolling interests, net
Net cash provided by (used in) financing activities
Effects of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$ 42,150
$ 245,984
$ 145,103
156,824
(22,191)
828
21,589
359
(186)
(33,950)
99
7,893
(117,145)
178,016
36,135
(31,102)
(816)
(7,235)
(9,941)
9,582
509
163,490
(17,819)
768
19,254
303
1,330
(45,238)
1,460
2,159
(107,716)
44,992
(6,205)
(10,681)
6,127
(10,371)
(13,179)
17,912
(280)
160,092
(16,960)
7,448
12,993
380
1,717
(27,675)
5,587
(24,059)
(35,523)
61,595
(10,961)
3,786
(8,087)
63,005
(12,581)
15,920
1,068
108,758
(66)
(133,523)
206,587
(140,924)
14,835
233,216
399,417
(50,742)
(12,183)
17,695
297,618
(332,312)
101,836
6,109
(63,043)
22,312
(4,339)
—
(36,194)
(8,630)
63,911
8,982
(90,588)
—
(331,956)
(250,626)
361,670
(471)
(58,612)
15,122
(9,067)
—
(5,342)
21,363
(34,135)
(15,031)
(5,643)
—
19,228
(180,024)
103,739
(771)
(27,453)
2,790
—
136
3,009
(13,227)
16,007
(1,667)
(4,085)
(154)
(101,700)
(39,588)
—
20,210
301,827
—
(71,290)
11,888
(1,149)
(915)
220,983
1,959
97,573
370,028
$ 467,601
(93,258)
—
(21,647)
38,673
(319,682)
(137,068)
26,225
(39)
285
(506,511)
(8,010)
(95,876)
465,904
$ 370,028
(312,215)
(2,030)
2,200
349,297
—
(45,854)
5,742
(1,210)
(2,257)
(6,327)
871
190,462
275,442
$ 465,904
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
NATURE OF OPERATIONS AND ACCOUNTING POLICIES
Nature of Operations. SEACOR Holdings Inc. (“SEACOR”) and its subsidiaries (collectively referred to as the “Company”) are in the
business of owning, operating, investing in and marketing equipment, primarily in the offshore oil and gas, industrial aviation and marine
transportation industries. The Company operates a diversified fleet of offshore support vessels and helicopters servicing oil and gas exploration,
development and production facilities worldwide, a fleet of U.S.-flag product tankers that transport petroleum, chemicals and crude products
primarily in the U.S. domestic or “coastwise” trade and a fleet of roll-on/roll-off vessels in the shipping trade between the United States, the
Bahamas and the Caribbean. In addition, the Company operates a fleet of inland river barges and towboats transporting grain, liquids and other
bulk commodities on the U.S. Inland River Waterways. The Company’s environmental services segment primarily provides emergency
preparedness and response services to oil, chemical, industrial and marine transportation clients, and government agencies in the United States
and abroad. The Company’s commodity trading and logistics segment is an integrated business involved in the purchase, storage, transportation,
processing and sale of agricultural and energy commodities.
Basis of Consolidation. The consolidated financial statements include the accounts of SEACOR and its majority-owned subsidiaries. All
significant inter-company accounts and transactions are eliminated in consolidation.
Noncontrolling interests are included in the consolidated statement of financial position within equity separate from the Company’s equity.
The Company reports consolidated net income inclusive of both the Company’s and the noncontrolling interests’ shares and, separately, the
amounts of consolidated net income attributable to the Company and noncontrolling interests. If a subsidiary is deconsolidated upon a change in
control, any retained noncontrolling equity investment in the former subsidiary is measured at fair value and a gain or loss is recognized in net
income based on such fair value. If a noncontrolled subsidiary is consolidated upon a change in control, any previous noncontrolling equity
investment in the subsidiary is measured at fair value and a gain or loss is recognized in equity in earnings based on such fair value.
The Company employs the equity method of accounting for investments in business ventures when it has the ability to exercise significant
influence over the operating and financial policies of the ventures. Significant influence is generally deemed to exist if the Company has between
20% and 50% of the voting rights of an investee. The Company reports its investments in and advances to equity investees in the accompanying
consolidated balance sheets as investments, at equity, and advances to 50% or less owned companies. The Company reports its share of earnings
or losses of equity investees in the accompanying consolidated statements of income as equity in earnings of 50% or less owned companies, net
of tax.
The Company employs the cost method of accounting for investments in other business ventures over which the Company does not have
the ability to exercise significant influence. These investments in private companies are carried at cost and are adjusted only for capital
distributions and other-than-temporary declines in fair value.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such
estimates include those related to deferred revenues, allowance for doubtful accounts, useful lives of property and equipment, impairments,
income tax provisions and certain accrued liabilities. Actual results could differ from those estimates and those differences may be material.
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Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and
earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed
or determinable, and collectability is reasonably assured. Revenue that does not meet this criteria is deferred until the criteria are met. Deferred
revenues for the years ended December 31 were as follows (in thousands):
Balance at beginning of year
Revenues deferred during the year
Revenues recognized during the year
Write-off of previously deferred revenues
Balance at end of year
2011
2010
2009
$ 29,322
8,665
(26,731)
(1,234)
$ 10,022
$15,015
20,259
(5,902)
(50)
$29,322
$ 3,314
24,803
(13,102)
—
$ 15,015
As of December 31, 2011, deferred revenues included $9.7 million relating to the time charter of several offshore support vessels operating
in the U.S. Gulf of Mexico that are scheduled to be paid through the conveyance of a limited net profit interest in developmental oil-and-gas
producing properties owned by a customer. Payments from the conveyance of the limited net profit interest and the timing of such payments are
contingent upon production and energy sale prices. Based on the current production payout estimate, the deferred revenues are expected to be
paid during 2012. The Company will continue to recognize revenues as cash is received or earlier should future payments become determinable
and collectability is reasonably assured. All costs and expenses related to these charters were recognized as incurred.
The Company’s Offshore Marine Services segment earns and recognizes revenues primarily from the time charter and bareboat charter of
vessels to customers based upon daily rates of hire. Under a time charter, Offshore Marine Services provides a vessel to a customer and is
responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, Offshore Marine Services provides the vessel to the
customer and the customer assumes responsibility for all operating expenses and risk of operation. Vessel charters may range from several days
to several years. Revenues from time charters and bareboat charters are recorded and recognized as services are provided. In the U.S. Gulf of
Mexico, time charter durations and rates are typically established in the context of master service agreements, which govern the terms and
conditions of charter.
The Company’s Aviation Services segment charters the majority of its helicopters through master service agreements, subscription
agreements, day-to-day charter arrangements and contract-leases. Master service agreements and subscription agreements require incremental
payments above a fixed monthly fee based on hours flown. These agreements have fixed terms ranging from one month to five years and
generally may be cancelled upon 30-days notice. Day-to-day charter arrangements call for either a combination of a daily fixed fee plus a charge
based on hours flown or an hourly rate. Services provided under contract-leases can include only the equipment, or can include the equipment,
logistical and maintenance support, insurance and personnel, or a combination thereof. Fixed monthly fee revenues are recognized ratably over
the contract term. Usage or hourly based revenues are recognized as hours are flown. Aviation Services’ air medical services are provided under
contracts with hospitals that typically include either a fixed monthly and hourly rate structure or a fee per completed flight. Fixed monthly
revenues are recognized ratably over the month while per hour or per flight based revenues are recognized as hours are flown or flights are
completed. Most contracts with hospitals are longer term, but offer either party the ability to terminate with less than six months notice. Aviation
Services operates some air medical contracts pursuant to which it collects a fee per flight, either from a hospital or insurance company. With
respect to flightseeing activities, Aviation Services allocates block space to cruise lines and sells seats directly to customers with revenues
recognized as the services are performed. Aviation Services’ fixed based operation sells fuel on an ad hoc basis and those sales are recognized at
the time of fuel delivery. Training revenues are charged at a set rate per training course and include instructors, training materials and flight or
flight simulator time, as applicable. Training revenues are recognized as services are provided.
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The Company’s Inland River Services segment earns revenues primarily from voyage affreightment contracts whereby customers are
charged an established rate per ton to transport cargo from point to point. Revenues from voyage affreightment contracts are generally
recognized over the progress of the voyage while the related costs are expensed as incurred. Certain of Inland River Services’ barges are
operated in barge pools with other barges owned by third parties from whom Inland River Services earns and recognizes a management fee as
the services are rendered. Pursuant to the pooling agreements, operating revenues and expenses of participating barges are combined and the net
results are allocated on a pro-rata basis based on the number of barge days contributed by each participant. In addition, revenues are earned from
equipment chartered to third parties and from the storage and demurrage of cargos associated with affreightment activities. In both of these
cases, revenues are recognized as services are rendered. Inland River Services’ tank farm and handling facility earns revenues through rental and
throughput charges. Rental revenues are recognized ratably over the rental period while throughput charges are recognized as product volume
moves through the facility.
The Company’s Marine Transportation Services segment earns revenue from the time charter, bareboat charter and voyage charter of
vessels, contracts of affreightment and ship management agreements with vessel owners. Under a time charter, Marine Transportation Services
provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, Marine
Transportation Services provides the vessel to a customer and the customer assumes responsibility for all operating expenses and risk of
operation. Revenues from time charters and bareboat charters are recognized as services are provided. Voyage contracts are contracts to carry
cargos on a single voyage basis regardless of time to complete. Contracts of affreightment are contracts for cargos that are committed on a multivoyage basis for various periods of time with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per
ton. Revenues for voyage contracts and contracts of affreightment are recognized over the progress of the voyage while the related costs are
expensed as incurred. Ship management agreements typically provide for technical services over a specified period of time, typically a year or
more. Revenues from ship management agreements are recognized ratably over the service period.
The Company’s Environmental Services segment earns revenues primarily from emergency response, retainer, consulting and training,
project management and remediation services. Emergency response revenues are recognized as services are provided and are dependent on the
magnitude and number of individual responses. Retainer agreements with vessel owners generally range from one to three years while retainer
agreements with facility owners can be as long as ten years. Such retainer fees are generally recognized ratably over the term of the contract.
Consulting and training services fees are recognized as the services are provided based on the contract terms. Project management and
remediation services are provided on a time and material basis with revenues recognized as the services are provided or on a fixed fee basis with
revenues and expenses recognized upon completion of the contract.
The Company’s Commodity Trading and Logistics segment earns revenues from the sale of rice, sugar and renewable fuels (primarily
ethanol), the rental of tank storage, and through voyage affreightment contracts on leased-in liquid tank barges and towboats. Revenues from
rice, sugar and renewable fuel sales are recorded when title transfers to the buyer, typically when cash is received. Revenues from the rental of
tank storage are recognized ratably over the lease periods. Revenues from voyage affreightment contracts are generally recognized over the
progress of the voyage while the related costs are expensed as incurred.
Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased
to be cash equivalents. Cash equivalents consist of U.S treasury securities, money market instruments, time deposits and overnight investments.
Restricted Cash. Restricted cash, consisting primarily of U.S. treasury securities, primarily relates to income generated from the operations
of certain of Marine Transportation Services’ U.S.-flag double-hull product tankers (see Note 9).
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Marketable Securities. Marketable equity securities with readily determinable fair values and debt securities are reported in the
accompanying consolidated balance sheets as marketable securities. These investments are stated at fair value with both realized and unrealized
gains and losses reported in the accompanying consolidated statements of income as marketable security gains (losses), net. Short sales of
marketable securities are stated at fair value in the accompanying consolidated balance sheets with both realized and unrealized gains and losses
reported in the accompanying consolidated statements of income as marketable security gains (losses), net.
Trade Receivables. Customers of Offshore Marine Services, Aviation Services and Marine Transportation Services are primarily major
and independent oil and gas exploration and production companies. Customers of Inland River Services are primarily major agricultural and
industrial companies based within the United States. Oil spill, emergency response and remediation services are provided by Environmental
Services to domestic and international shippers, major oil companies, independent exploration and production companies, pipeline and
transportation companies, power generating operators, industrial companies, airports and state and local government agencies. Customers of
Commodity Trading and Logistics include major agricultural and industrial companies, major and independent oil and gas production
companies, foreign governments and local distributors. All customers are granted credit on a short-term basis and related credit risks are
considered minimal. The Company routinely reviews its trade receivables and makes provisions for probable doubtful accounts; however, those
provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed
uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.
Derivative Instruments. The Company accounts for derivatives through the use of a fair value concept whereby all of the Company’s
derivative positions are stated at fair value in the accompanying consolidated balance sheets. Realized and unrealized gains and losses on
derivatives not designated as hedges are reported in the accompanying consolidated statements of income as derivative gains (losses), net.
Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in
the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying
consolidated statements of income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash
flow hedges are reported as a component of other comprehensive income in the accompanying consolidated statement of comprehensive income
to the extent they are effective and reclassified into earnings on the same line item associated with the hedged transaction and in the same period
the hedged transaction affects earnings. Any ineffective portions of cash flow hedges are reported in the accompanying consolidated statements
of income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are
entered into by the Company’s equity method investees are also reported as a component of the Company’s other comprehensive income (loss)
in proportion to the Company’s ownership percentage in the investee, with reclassifications and ineffective portions being included in equity in
earnings of 50% or less owned companies, net of tax, in the accompanying consolidated statements of income.
Concentrations of Credit Risk. The Company is exposed to concentrations of credit risk associated with its cash and cash equivalents,
restricted cash, marketable securities and derivative instruments. The Company minimizes its credit risk relating to these positions by monitoring
the financial condition of the financial institutions and counterparties involved and by primarily conducting business with large, well-established
financial institutions and diversifying its counterparties. The Company does not currently anticipate nonperformance by any of its significant
counterparties. The Company is also exposed to concentrations of credit risk relating to its receivables due from customers in the industries
described above. The Company does not generally require collateral or other security to support its outstanding receivables. The Company
minimizes its credit risk relating to receivables by performing ongoing credit evaluations and, to date, credit losses have not been material.
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Inventories. Inventories are stated at the lower of cost (using the first-in, first-out and average cost methods) or market. Inventories consist
primarily of fuel and fuel oil in the Company’s Offshore Marine Services, Marine Transportation Services and Inland River Services segments,
spare parts and fuel in the Company’s Aviation Services segment, and ethanol in the Company’s Commodity Trading and Logistics segment.
The Company records write-downs, as needed, to adjust the carrying amount of inventories to the lower of cost or market. During the years
ended December 31, 2011, 2010, and 2009, the Company recorded market write-downs of $5.3 million, $5.8 million and $0.4 million related to
Commodity Trading and Logistics’ ethanol and rice inventories.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset
to an estimated salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being
placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or
similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which
case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of December 31, 2011, the estimated useful life (in years) of each of the Company’s major classes of new equipment was as follows:
Helicopters (1)
Inland river dry cargo and deck barges
U.S.-flag tankers
Roll-On/Roll-Off (“RORO”) vessels
Harbor and offshore tugs
(1)
20
15
20
25
25
25
20
25
25
Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to improvements in new
aircraft models that continue to increase their long-term value and make them viable for operation over a longer period of time. For the six months ended December 31, 2011, the change
in estimate increased operating income by $7.6 million, net income by $4.9 million and basic and diluted earnings per share by $0.23.
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The Company’s major classes of property and equipment as of December 31 were as follows (in thousands):
Accumulated
2011
Helicopters
Inland river barges and towboats
U.S.-flag tankers
RORO vessels
Harbor and Offshore tugs and ocean liquid tank barges
Other (2)
Construction in progress
2010
Helicopters
Inland river barges and towboats
U.S.-flag tankers
RORO vessels
Harbor and Offshore tugs and ocean liquid tank barges
Other (2)
Construction in progress
Historical
Cost (1)
Depreciation
Net Book
Value
$ 921,150
693,197
385,715
317,894
17,474
171,597
357,975
240,293
$3,105,295
$ (355,913)
(153,984)
(94,064)
(135,407)
(1,208)
(37,871)
(140,776)
—
$ (919,223)
$ 565,237
539,213
291,651
182,487
16,266
133,726
217,199
240,293
$2,186,072
$ 894,677
645,807
355,912
347,011
—
174,761
265,903
119,683
$2,803,754
$ (337,696)
(131,926)
(77,021)
(140,844)
—
(32,668)
(114,877)
—
$ (835,032)
$ 556,981
513,881
278,891
206,167
—
142,093
151,026
119,683
$1,968,722
(1)
Includes property and equipment acquired in business acquisitions and recorded at fair value as of the date of the acquisition.
(2)
Includes oil spill equipment, land and buildings, aviation spares, leasehold improvements, fixed-wing aircraft, vehicles and other property and equipment.
Depreciation expense totaled $150.9 million, $158.3 million and $155.1 million in 2011, 2010 and 2009, respectively.
Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and
equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial
characteristics of equipment as well as major renewals and improvements to other properties are capitalized.
models under programs known as “power-by-hour” maintenance contracts. These programs require the Company to pay for maintenance service
ratably over the contract period, typically based on actual flight hours. Power-by-hour providers generally bill monthly based on hours flown in
the prior month, the costs being expensed as incurred. In the event the Company places a helicopter in a program after a maintenance period has
begun, it may be necessary to pay an initial buy-in charge based on hours flown since the previous maintenance event. The buy-in charge is
normally recorded as a pre-paid expense and amortized as an operating expense over the remaining power-by-hour contract period. If a
helicopter is sold or otherwise removed from a program before the scheduled maintenance work is carried out, the Company may be able to
recover part of its payments to the power-by-hour provider, in which case the Company records a reduction to operating expenses when it
receives the refund.
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Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized
over such assets’ estimated useful lives. Capitalized interest totaled $5.8 million, $3.6 million and $2.3 million in 2011, 2010 and 2009,
respectively.
Intangible Assets. The Company’s intangible assets primarily arose from business acquisitions (see Note 4) and consist of non-compete
agreements, trademarks and tradenames, customer relationships, software and technology, and acquired contractual rights. These intangible
assets are amortized over their estimated useful lives ranging from two to ten years. During the years ended December 31, 2011, 2010 and 2009,
the Company recognized amortization expense of $5.9 million, $5.2 million and $5.0 million, respectively.
The Company’s intangible assets by type were as follows (in thousands):
Acquired intangible assets
Foreign currency translation
Acquired intangible assets
Foreign currency translation
Fully amortized intangible assets
Year ended December 31, 2011
Non-Compete
Agreements
Trademark/
Tradenames
Customer
Software/
Relationships
Technology
Gross Carrying Value
$
$
$
$
1,002
617
—
1,619
—
—
(85)
1,534
$
5,805
70
(1)
5,874
—
—
—
5,874
$
34,107
500
(6)
34,601
2,793
2
(50)
37,346
$
600
590
—
1,190
—
—
(600)
$
590
Acquired
Contractual
Rights
$
Total
4,772
1,064
—
5,836
3,809
—
—
9,645
$46,286
2,841
(7)
49,120
6,602
2
(735)
$54,989
$(3,347)
(521)
(3,868)
(1,092)
—
$(4,960)
6.02
$(22,732)
(5,219)
(27,951)
(5,947)
735
$(33,163)
4.94
$
Accumulated Amortization
Amortization expense
Amortization expense
Fully amortized intangible assets
Weighted average remaining contractual life, in years
$ (434)
(313)
(747)
(570)
85
$(1,232)
1.33
$(2,281)
(578)
(2,859)
(631)
—
$(3,490)
3.86
$(16,280)
(3,559)
(19,839)
(3,446)
50
$(23,235)
4.88
$(390)
(248)
(638)
(208)
600
$(246)
2.92
Future amortization expense of intangible assets for each of the years ended December 31 is as follows (in thousands):
2012
2013
2014
2015
2016
Years subsequent to 2016
$ 5,502
4,910
4,332
3,028
1,785
2,269
$21,826
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Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including
intangible assets, when indicators of impairment are present. If the carrying values of the assets are not recoverable, as determined by the
estimated undiscounted cash flows, the carrying values of the assets are reduced to fair value. Generally, fair value is determined using valuation
techniques, such as expected discounted cash flows or appraisals, as appropriate. During the years ended 2011, 2010 and 2009, the Company
recognized impairment charges of $0.1 million, $19.0 million and $2.3 million, respectively, related to long-lived assets held for use.
During the year ended December 31, 2010, the Seabulk America , a Marine Transportation Services’ U.S.-flag product tanker, had been
scheduled to undergo a regulatory drydocking, a requirement for continued operation. Given the prevailing market conditions, the Company
deferred the drydocking, laid-up the vessel and recognized an impairment charge of $18.7 million reducing the vessel’s carrying value to its fair
value of $5.0 million. During the year ended December 31, 2011, the Company sold the Seabulk America and recognized a gain on the sale of
$1.1 million. The Seabulk America had no operating revenues for the year ended December 31, 2011 and contributed operating revenues of $5.2
million and $12.4 million for the years ended December 31, 2010 and 2009, respectively.
Impairment of 50% or Less Owned Companies. The Company performs regular reviews of each investee’s financial condition, the
business outlook for its products and services, and its present and projected results and cash flows. When an investee has experienced consistent
declines in financial performance or difficulties in raising capital to continue operations, and when the Company expects the decline to be otherthan-temporary, the investment is written down to fair value. Actual results may vary from estimates due to the uncertainty regarding the
projected financial performance of investees, the severity and expected duration of declines in value, and the available liquidity in the capital
markets to support the continuing operations of the investees in which the Company has investments. During the year ended December 31, 2009,
the Company recognized impairment charges of $1.1 million related to 50% or less owned companies. The Company did not recognize any
impairment charges in 2011 or 2010.
Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and
intangible assets acquired. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of
impairment develop between annual impairment tests. The Company’s impairment review process compares the fair value of the reporting unit
to its carrying value, including the goodwill related to the reporting unit. To determine the fair value of the reporting unit, the Company uses a
discounted future cash flow approach that uses estimates for revenues, costs and appropriate discount rates, among other things. These estimates
are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business
planning and forecasting process. While the Company believes its estimates and assumptions are reasonable, variations from those estimates
could produce materially different results. The Company did not recognize any goodwill impairments in 2011, 2010 or 2009.
Business Combinations. The Company recognizes, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities
assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. Shares issued in consideration
for a business combination, contingent consideration arrangements and pre-acquisition loss and gain contingencies are all measured and recorded
at their acquisition-date fair value. Subsequent changes to fair value of contingent consideration arrangements are generally reflected in earnings.
Any in-process research and development assets acquired are capitalized as are certain acquisition-related restructuring costs if the criteria
related to exit or disposal cost obligations are met as of the acquisition date. Acquisition-related transaction costs are expensed as incurred and
any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals are recorded as an adjustment to income tax
expense. The operating results of entities acquired are included in the accompanying consolidated statements of income from the date of
acquisition (see Note 4).
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Deferred Financing Costs. Deferred financing costs incurred in connection with the issuance of debt are amortized over the life of the
related debt using the effective interest rate method for term loans and straight line method for revolving credit facilities. Amortization expense
for deferred financing costs totaled $0.5 million, $0.5 million and $1.0 million in 2011, 2010 and 2009, respectively, and is included in interest
expense in the accompanying consolidated statements of income.
Self-insurance Liabilities. The Company maintains hull, liability and war risk, general liability, workers compensation and other insurance
customary in the industries in which it operates. Most of the insurance is obtained through SEACOR sponsored programs, with premiums
charged to participating businesses based on insured asset values. Both the marine hull and liability policies have significant annual aggregate
deductibles. Marine hull annual aggregate deductibles are accrued as claims are incurred by participating businesses and proportionately shared
among the participating businesses. Marine liability annual aggregate deductibles are accrued based on historical loss experience and actual
claims incurred. The Company also maintains self-insured health benefit plans for its participating employees. Exposure to the health benefit
plans are limited by maintaining stop-loss and aggregate liability coverage. To the extent that estimated self-insurance losses, including the
accrual of annual aggregate deductibles, differ from actual losses realized, the Company’s insurance reserves could differ significantly and may
result in either higher or lower insurance expense in future periods.
Income Taxes. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the
book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or
liabilities are provided using the enacted tax rates expected to apply to taxable income in the periods in which they are expected to be settled or
realized. Interest and penalties relating to uncertain tax positions are recognized in interest expense and administrative and general, respectively,
in the accompanying consolidated statements of income. The Company records a valuation allowance to reduce its deferred tax assets if it is
more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred Gains – Equipment Sale-Leaseback Transactions and Financed Equipment Sales. From time to time, the Company enters into
equipment sale-leaseback transactions with finance companies or provides seller financing on sales of its equipment to third parties or to
noncontrolled 50% or less owned companies. A portion of the gains realized from these transactions is not immediately recognized in income
and has been recorded in the accompanying consolidated balance sheets in deferred gains and other liabilities. In sale-leaseback transactions (see
Note 4), gains are deferred to the extent of the present value of future minimum lease payments and are amortized as reductions to rental expense
over the applicable lease terms. In financed equipment sales (see Note 4), gains are deferred to the extent that the repayment of purchase notes is
dependent on the future operations of the sold equipment and are amortized based on cash received from the buyers. Deferred gain activity
related to these transactions for the years ended December 31 was as follows (in thousands):
Deferred gains arising from equipment sales
Amortization of deferred gains included in operating expenses as reduction to rental expense
Amortization of deferred gains included in gains on asset dispositions and impairments, net
Reductions of deferred gains on repurchased equipment and other
125
2011
2010
2009
$113,871
14,319
(22,191)
(2,947)
(10)
$103,042
$ 58,008
76,914
(17,819)
(3,232)
—
$113,871
$ 61,613
17,471
(16,960)
(3,487)
(629)
$ 58,008
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Deferred Gains – Equipment Sales to the Company’s 50% or Less Owned Companies. A portion of the gains realized from non-financed
sales of the Company’s vessels, helicopters and barges to its 50% or less owned companies is not immediately recognized in income and has
been recorded in the accompanying consolidated balance sheets in deferred gains and other liabilities. Effective January 1, 2009, the Company
adopted new accounting rules established by the FASB relating to the sale of its equipment to its noncontrolled 50% or less owned companies.
For transactions occurring subsequent to the adoption of the new accounting rules, gains are deferred only to the extent of the Company’s
uncalled capital commitments and amortized as those commitments lapse or funded amounts are returned by the noncontrolled 50% or less
owned companies. For transactions occurring prior to the adoption of the new accounting rules, gains were deferred and are being amortized
based on the Company’s ownership interest, the Company’s uncalled capital commitments, cash received and the applicable equipments’
depreciable lives. Deferred gain activity related to these transactions for the years ended December 31 was as follows (in thousands):
Deferred gains arising from equipment sales
Amortization of deferred gains included in gains on asset dispositions and impairments, net
Deferred gains recognized on the Seaspraie Acquisition (see Note 4) and included in gains on
asset dispositions and impairments, net
2011
2010
2009
$17,965
—
(1,437)
$ 35,223
1,000
(6,063)
$37,591
—
(2,368)
—
$16,528
(12,195)
$ 17,965
—
$35,223
Stock Based Compensation. Stock based compensation is amortized to compensation expense on a straight line basis over the requisite
service period of the grants using the Black-Scholes valuation model. The Company will reconsider its use of this model if additional
information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have
characteristics that cannot be reasonably estimated using this model. The Company does not estimate forfeitures in its expense calculations as
forfeiture history has been minor. The Company presents the excess tax benefits from the exercise of stock options as a financing cash flow in
the accompanying consolidated statements of cash flows.
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Accumulated Other Comprehensive Loss. The components of accumulated other comprehensive income (loss) were as follows (in
thousands):
Noncontrolling
Foreign
Currency
Translation
Adjustments
Other comprehensive income (loss)
Income tax benefit
Other comprehensive income (loss)
$
$
(5,045)
3,063
(1,074)
(3,056)
(1,443)
504
(3,995)
(629)
220
(4,404)
SEACOR Holdings Inc. Stockholders
Derivative
Losses on
Cash Flow
Hedges, net
Other
$
—
(314)
110
(204)
(4,199)
1,470
(2,933)
(900)
315
$ (3,518)
$ —
—
—
—
(171)
60
(111)
116
(41)
$ (36)
Total
$(5,045)
2,749
(964)
(3,260)
(5,813)
2,034
(7,039)
(1,413)
494
$(7,958)
Interests
Foreign
Currency
Translation
Adjustments
$
$
—
—
—
—
—
—
—
(118)
—
(118)
Other
Comprehensive
Income (Loss)
$
$
$
$
$
$
2,749
(964)
1,785
(5,813)
2,034
(3,779)
(1,531)
494
(1,037)
Foreign Currency Translation. The assets, liabilities and results of operations of certain SEACOR subsidiaries are measured using their
functional currency which is the currency of the primary foreign economic environment in which they operate. Upon consolidating these
subsidiaries with SEACOR, their assets and liabilities are translated to U.S. dollars at currency exchange rates as of the balance sheet dates and
their revenues and expenses are translated at the weighted average currency exchange rates during the applicable reporting periods. Translation
adjustments resulting from the process of translating these subsidiaries’ financial statements are reported in other comprehensive income (loss)
in the accompanying consolidated statements of comprehensive income.
Foreign Currency Transactions. Certain SEACOR subsidiaries enter into transactions denominated in currencies other than their
functional currency. Gains and losses resulting from changes in currency exchange rates between the functional currency and the currency in
which a transaction is denominated are included in foreign currency gains (losses), net in the accompanying consolidated statements of income
in the period in which the currency exchange rates change.
Earnings Per Share. Basic earnings per common share of SEACOR are computed based on the weighted average number of common
shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted
average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury
stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been
issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of all outstanding
convertible notes. For the years ended December 31, 2011, 2010 and 2009, diluted earnings per common share of SEACOR excluded 338,920,
281,265 and 810,260, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.
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Computations of basic and diluted earnings per common share of SEACOR for the years ended December 31 were as follows (in
thousands, except share data).
2011
Effect of Dilutive Securities, net of tax:
Options and Restricted Stock
2010
Effect of Dilutive Securities:
Diluted Earnings Per Common Share of SEACOR Holdings Inc
2009
Effect of Dilutive Securities:
Convertible Securities
Diluted Earnings Per Common Share of SEACOR Holdings Inc
2.
Net Income
Average o/s
Shares
Per Share
$ 41,056
21,119,461
$ 1.94
—
$ 41,056
347,382
21,466,843
$ 1.91
$244,724
21,402,441
$ 11.43
—
$244,724
354,776
21,757,217
$ 11.25
$143,810
19,950,702
$ 7.21
—
9,870
$153,680
189,545
3,247,921
23,388,168
$ 6.57
FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The
Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when
measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets
for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are
not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3
inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
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The Company’s financial assets and liabilities as of December 31 that are measured at fair value on a recurring basis were as follows (in
thousands):
Level 1
Level 2
Level 3
$ 33,387
1,095
259,974
$33,511
3,027
—
$ —
—
—
22,612
2,874
—
10,175
—
—
$101,807
14,006
323,885
$45,602
8,158
—
$ —
—
—
36,076
11,555
—
9,455
—
—
2011
ASSETS
Marketable securities (1)
Derivative instruments (included in other receivables)
Construction reserve funds and Title XI reserve funds
LIABILITIES
Derivative instruments (included in other current liabilities)
2010
ASSETS
Marketable securities (1)
Derivative instruments (included in other receivables)
Construction reserve funds and Title XI reserve funds
LIABILITIES
Derivative instruments (included in other current liabilities)
(1)
Marketable security gains (losses), net include losses of $21.1 million and gains of $2.0 million and $2.0 million for the years ended December 31, 2011, 2010 and 2009, respectively,
related to marketable security positions held by the Company as of December 31, 2011. Marketable security gains (losses), net include losses of $1.1 million and gains of $0.9 million for
the years ended December 31, 2010 and 2009, respectively, related to marketable security positions held by the Company as of December 31, 2010. In addition, during the years ended
December 31, 2011, 2010 and 2009, the Company recorded dividend income (expense), net on marketable securities of $(0.8) million, $(0.1) million and $0.1 million, respectively and
recorded interest income, net on marketable securities of $2.8 million, $3.1 million and $0.7 million, respectively.
As of December 31, 2011, the Company’s Level 2 marketable securities include a $33.4 million investment in 9.25% Senior Secured Notes
(the “Notes”) due from Trailer Bridge, Inc. (“Trailer Bridge”). The Company holds a 50.9% interest in the total outstanding Notes. Trailer
Bridge filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in United States Bankruptcy Court for the Middle District of Florida
(the “Bankruptcy Court”) on November 16, 2011. Subsequent to December 31, 2011, Trailer Bridge reached an agreement with a majority of the
Note holders, including SEACOR, on a restructuring plan that was submitted to the Bankruptcy Court for approval on January 14, 2012. Under
the proposed plan, the Note holders would receive a pro rata share of a new $65.0 million debt instrument and a pro rata share in 91% of the
equity interest in the newly restructured company. Existing common shareholders would have the option to receive a 9% equity interest in the
newly restructured company or a cash payment of $0.15 per share. If the restructuring plan is approved by the Bankruptcy Court, SEACOR may
or may not control Trailer Bridge depending on the number of existing common shareholders who elect cash payments.
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The estimated fair value of the Company’s other financial assets and liabilities as of December 31 were as follows (in thousands).
2011
ASSETS
Cash, cash equivalents and restricted cash
Investments, at cost, in 50% or less owned companies (included in other assets)
Notes receivable from other business ventures (included in other receivables
and other assets)
LIABILITIES
Long-term debt, including current portion
2010
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$ 488,882
9,315
$ 488,882
see below
$382,679
7,847
$ 382,679
see below
55,768
see below
16,554
see below
1,036,541
1,058,637
712,045
722,014
The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt
was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of
arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because
of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the
fair value of the Company’s notes receivable from other business ventures as the overall returns are uncertain due to certain provisions for
additional payments contingent upon future events. Considerable judgment was required in developing certain of the estimates of fair value and,
accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market
exchange.
The Company’s non-financial assets and liabilities that were measured at fair value during the years ended December 31 were as follows
(in thousands):
Level 1
Level 2
Level 3
$ —
$ 1,000
$ —
—
11,992
—
—
16,415
—
—
—
395
$ —
—
—
—
$56,255
5,000
1,000
—
$ —
—
—
200
—
—
879
2011
ASSETS
Investment in Avion Logistics Limited (included in Investments, at Equity, and Advances to 50% or Less
Owned Companies) (1)
Investment in Soylutions LLC (included in Investments, at Equity, and Advances to 50% or Less Owned
Companies) (2 )
Investment in Mantenimiento Express Maritimo, S.A.P.I. De C.V. (included in Investments, at Equity,
and Advances to 50% or Less Owned Companies) (3 )
LIABILITIES
Lease Obligations for Helicopters (included in other current liabilities) ( 4 )
2010
ASSETS
Investment in Seaspraie ( 5 )
Seabulk America (included in Property and Equipment) ( 6 )
Investment in SES-Kazakhstan ( 7 )
Held for Sale Helicopter (included in Other Assets) ( 8 )
LIABILITIES
Lease Obligations for Helicopters (included in other current liabilities) ( 9 )
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Table of Contents
(1)
On June 1, 2011, the Company marked its investment in its Avion Logistics Limited joint venture to fair value following the acquisition of controlling interests (see Note 5). The
investments’ fair values were determined based on the Company’s purchase price of the acquired interests.
(2)
On July 29 2011, the Company marked its investment in its Soylutions LLC joint venture to fair value following the acquisition of controlling interests (see Note 5). The investments’ fair
values were determined based on the Company’s purchase price of the acquired interests.
(3)
On July 1, 2011, the Company marked its investment in its Mantenimiento Express Maritimo, S.A.P.I. De C.V. joint venture to fair value following the joint venture’s sale of an
additional equity interest to an unrelated third party (see Note 5). The investment’s fair value was determined based on the third party’s purchase price of the acquired interest.
(4)
During the year ended December 31, 2011, the Company recorded a gain of $0.2 million to decrease the carrying value of its exit obligations for three leased-in helicopters.
(5)
During the year ended December 31, 2010, the Company marked its investment in its Seaspraie joint venture to fair value following the acquisition of a controlling interest (see Note 4).
The investment’s fair value, consisting of barges and financial assets, was primarily based on the sale of similar equipment to an unrelated third party.
(6)
During the year ended December 31, 2010, the Company recorded an impairment charge of $18.7 million to reduce the carrying value of one of its tankers, the Seabulk America , to its
fair value. Fair value was determined by an independent market valuation based on the sale of similar equipment.
(7)
During the year ended December 31, 2010, the Company marked its investment in its SES-Kazakhstan joint venture to fair value following the acquisition of a controlling interest (see
Note 4). The investment’s fair value was based on the Company’s purchase price of the non-controlling interest.
(8)
During the year ended December 31, 2010, the Company recorded an impairment charge of $0.1 million to reduce its carrying value of one helicopter to fair value.
(9)
During the year ended December 31, 2010, the Company recorded an impairment charge of $0.2 million to increase the carrying value of its exit obligations for three leased-in
helicopters.
3.
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are
included in other receivables and other current liabilities, respectively, in the accompanying consolidated balance sheets. The fair values of the
Company’s derivative instruments as of December 31 were as follows (in thousands):
2011
Derivatives designated as hedging instruments:
Forward currency exchange contracts (fair value hedges)
Interest rate swap agreements (cash flow hedges)
Derivative
Derivative
Derivative
Asset
Liability
Asset
Liability
$
Derivatives not designated as hedging instruments:
Options on equities and equity indices
Forward currency exchange, option and future contracts
Interest rate swap agreements
Commodity swap, option and future contracts:
Exchange traded
Non-exchange traded
U.S. treasury notes, rate locks and bond future and option contracts
131
2010
Derivative
—
—
—
$
—
4,899
4,899
$ 1,368
—
1,368
$
697
5,060
5,757
257
10
—
1,637
1,128
3,167
—
1,872
—
1,504
329
2,578
838
3,017
—
4,122
$ 4,122
2,089
129
—
8,150
$ 13,049
3,466
4,938
10,520
20,796
$ 22,164
9,726
1,112
4
15,253
$ 21,010
Table of Contents
Fair Value Hedges . As of December 31, 2010, the Company had designated certain of its forward currency exchange contracts with
notional values of €56.0 million as fair value hedges in respect of capital commitments denominated in Euros. During the year ended
December 31, 2011, the Company designated €87.3 million and dedesignated €57.8 million notional value of its forward currency exchange
contracts as fair value hedges, and €85.5 million notional value of these contracts matured. As of December 31, 2011, the Company had no
forward currency exchange contracts designated as fair value hedges. By entering into these forward currency exchange contracts, the Company
had fixed a portion of its euro capital commitments in U.S. dollars to protect against currency fluctuations for equipment that was scheduled to
be delivered in 2011 through 2013.
The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the years ended December 31 as
2011
2010
2009
Forward currency exchange contracts, effective and ineffective portions
Increase (decrease) in the fair value of hedged items included in property and equipment corresponding to
effective portion of derivative (gains) losses
$ 5,770
$
(5,810)
(40)
$(1,973)
$205
1,855
$ (118)
60
$265
Cash Flow Hedges. As of December 31, 2011 and 2010, the Company is a party to various interest rate swap agreements with maturities
ranging from 2013 to 2014 which have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates
ranging from 2.25% to 2.85% on aggregate notional values of $125.0 million and receive a variable interest rate based on the London Interbank
Offered Rate (“LIBOR”) on these notional values. As of December 31, 2011, one of the Company’s Offshore Marine Services 50% or less
owned companies had entered into an interest rate swap agreement maturing in 2015 that has been designated as a cash flow hedge. This
instrument calls for the joint venture to pay a fixed interest rate of 1.48% on the amortized notional value of $19.6 million and receive a variable
interest rate based on LIBOR on the amortized notional value. In addition, as of December 31, 2011, one of the Company’s Inland River
Services 50% or less owned companies had four interest rate swap agreements with maturities ranging from 2013 to 2015 that have been
designated as cash flow hedges. These instruments call for the joint venture to pay fixed rates of interest ranging from 1.53% to 4.16% on the
aggregate amortized notional value of $53.7 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional
value. By entering into these interest rate swap agreements, the Company and its 50% or less owned companies have converted the variable
LIBOR component of certain of their outstanding borrowings to a fixed interest rate.
The Company recognized gains (losses) on derivative instruments designated as cash flow hedges for the years December 31 as follows (in
thousands):
Other comprehensive income
(loss)
2011
2010
2009
Interest rate swap agreements, effective portion
Interest rate swap agreements, ineffective portion
Reclassification of derivative losses to interest expense or equity in earnings of
50% or less owned companies
132
Derivative gains
(losses), net
2011
2010
2009
$(3,419)
—
$(7,589)
—
$(1,507)
—
$—
(46)
$ —
122
$ —
(392)
2,519
$ (900)
3,390
$(4,199)
1,193
$ (314)
—
$(46)
—
$122
—
$(392)
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Other Derivative Instruments . The Company recognized gains (losses) on derivative instruments not designated as hedging instruments
for the years ended December 31 as follows (in thousands):
2011
Options on equities and equity indices
Forward currency exchange, option and future contracts
Interest rate swap agreements
Commodity swap, option and future contracts:
Exchange traded
Non-exchange traded
U.S. treasury notes, rate locks and bond future and option contracts
2010
2009
$ 1,693
(620)
(2,390)
$ 1,578
3,981
(3,620)
$ 3,244
4,055
(571)
(10,815)
4,384
(28,301)
$(36,049)
(9,581)
5,344
8,499
$ 6,201
(2,278)
6,123
515
$11,088
The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the
underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation
and other related businesses. These contracts are typically entered into to mitigate the risk of changes in market value of marketable security
positions that the Company is either about to acquire, has acquired or is about to dispose of.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of
December 31, 2011, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate
U.S. dollar equivalent of $56.4 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could
offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, Mexico,
Central and South America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates
beyond twelve to eighteen months.
The Company has entered into various interest rate swap agreements maturing in 2012 and 2013 that call for the Company to pay fixed
interest rates ranging from 1.79% to 2.59% on aggregate notional values of $95.9 million and receive a variable interest rate based on LIBOR on
these notional values. In addition, one of the Company’s Offshore Marine Services 50% or less owned companies has entered into an interest
rate swap agreement maturing in 2014. This instrument calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional
value of $25.6 million and receive a variable interest rate based on LIBOR on the amortized notional value. The general purpose of these interest
rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company or its
joint venture.
The Company enters and settles positions in various exchange and non-exchange traded commodity swap, option and future contracts. In
the Company’s commodity trading and logistics business, fixed price future purchase and sale contracts of ethanol and sugar are included in the
Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sales
contracts as well as its inventory balances from market changes. As of December 31, 2011, the net market exposure to ethanol and sugar under
these positions was not material. The Company also enters into exchange traded positions (primarily natural gas, crude oil, gasoline, ethanol and
sugar) to provide value to the Company should there be a sustained decline in the price of commodities that could lead to a reduction in the
market values and cash flows of the Company’s Offshore Marine Services and Inland River Services business segments. As of December 31,
2011, these positions were not material.
The Company enters and settles various positions in U.S. treasury notes and bonds through rate locks, futures or options on futures tied to
U.S. treasury notes. The general purpose of these transactions is to provide
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value to the Company should the price of U.S. treasury notes and bonds decline, leading to generally higher interest rates, which might lead to
higher interest costs for the Company. As of December 31, 2011, there were none of these types of positions outstanding.
4.
ACQUISITIONS AND DISPOSITIONS
Lewis & Clark Acquisition. On December 31, 2011, the Company acquired certain assets and liabilities of Lewis & Clark Marine, Inc. and
certain related affiliates (“Lewis & Clark”) for $29.6 million. The Company performed a preliminary fair value analysis and the purchase price
was allocated to the acquired assets and liabilities based on their fair values resulting in $1.6 million in goodwill being recorded. The preliminary
fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.
Windcat Acquisition. On December 22, 2011, the Company acquired 75% of the issued and outstanding shares in Windcat Workboats
Holdings Ltd. (“Windcat”) for $21.5 million in cash. Windcat is a UK and Holland based operator of 29 wind farm utility vessels operating in
the main offshore wind markets of Europe. The Company performed a preliminary fair value analysis and the purchase price was allocated to the
acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending
completion of a final valuation for the acquired assets and liabilities.
Naviera Acquisition. On December 21, 2011, the Company acquired a 70% controlling interest in SEACOR Colombia Fluvial (MI) LLC
for $1.9 million in cash. SEACOR Colombia Fluvial (MI) LLC’s wholly-owned subsidiary Naviera Central S.A. (“Naviera”) is a provider of
inland river barge and terminal services in Colombia. The Company performed a preliminary fair value analysis and the purchase price was
allocated to the acquired assets and liabilities based on their fair values resulting in $1.0 million in goodwill being recorded. The preliminary fair
value analysis is pending completion of a final valuation for the acquired assets and liabilities.
Soylutions Acquisition. On July 29, 2011, the Company obtained a 100% controlling interest in Soylutions LLC (“Soylutions”) through its
acquisition of its partner’s interest for $11.9 million in cash (see Note 5). The Company performed a preliminary fair value analysis and the
purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The
preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.
G&G Shipping Acquisition. On April 13, 2011, the Company acquired certain real property, eight foreign- flag Roll-on/Roll-off
(“RORO”) vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the
Caribbean. The operating company leases-in the real property and the RORO vessels from the Company. The Company’s purchase price of
$33.5 million included cash consideration of $30.3 million and the contribution of a $3.2 million note receivable. The Company performed a fair
value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values, resulting in $0.6 million of
goodwill being recorded. The fair value analysis was finalized in April 2011.
SES Kazakhstan Acquisition. On August 31, 2010, the Company obtained a 100% controlling interest in SES Borkit LLP through its
acquisition of its partner’s interest for $1.0 million (cash of $0.6 million and contingent consideration of $0.4 million). Upon acquisition, SESBorkit LLP was renamed SES-Kazakhstan LLP (“SES-Kazakhstan”). The selling partner has the opportunity to receive additional consideration
of up to $0.4 million based on certain performance measures over the period from the date of acquisition through August 2013. As a
consequence of the acquisition of a controlling interest, the Company adjusted its investment in SES-Kazakhstan to fair value resulting in the
recognition of a $0.5 million gain, net of tax, which is included in equity in earnings of 50% or less owned companies. Following the change in
control, the Company consolidated SES-Kazakhstan’s financial position and results of its operations. The Company performed a fair value
analysis and the purchase price was allocated to the acquired assets and liabilities resulting in no goodwill being recorded. The fair value analysis
was finalized in August 2011. As of December 31, 2011, no additional consideration was earned by the selling partner.
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SEASPRAIE Acquisition. On July 31, 2010, the Company obtained a 100% controlling interest in Seaspraie Holdings LLC (“Seaspraie”)
through the redemption of its partner’s interest through the joint venture’s distribution of financial assets and equipment totaling $56.1 million.
As a consequence of the acquisition of a controlling interest, the Company adjusted its investment in Seaspraie to fair value resulting in the
recognition of a $2.5 million gain, net of tax, which is included in equity in earnings of 50% or less owned companies for the year ended
December 31, 2010. In addition, the Company recognized previously deferred gains on asset sales to Seaspraie of $12.2 million. Following the
change in control, the Company consolidated Seaspraie’s financial position and results of its operations. The Company performed a fair value
analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being
recorded. The fair value analysis was finalized in September 2010.
PIER Acquisition. On December 1, 2009, the Company acquired all of the issued and outstanding shares of PIER Systems Inc. (“PIER”),
a provider of crisis communication consulting services and software in the United States and abroad, for $2.4 million ($1.7 million paid in 2009
and accrued contingent consideration of $0.7 million being recorded). The Company performed a fair value analysis and the purchase price was
allocated to the acquired assets and liabilities based on their fair values resulting in $1.0 million of goodwill being recorded. The fair value
analysis was finalized in December 2010. The selling stockholders of PIER have the opportunity to receive additional consideration of up to $1.3
million, of which $0.7 million was accrued at acquisition, based upon certain performance measures over the period from the date of acquisition
through May 2011. During the years ended December 31, 2011 and 2010, the Company paid $0.6 million and $0.2 million, respectively, of
additional consideration. During the year ended December 31, 2011, the Company accrued additional contingent consideration of $0.1 million as
general and administrative expenses in the accompanying consolidated financial statements. As of December 31, 2011, the Company had paid
$0.8 million, in the aggregate, of additional consideration.
CBK Acquisition. On December 1, 2009, the Company acquired all of the assets of CBK, Inc., a liquid cargo servicing company, for $0.5
million in cash ($0.3 million paid in 2009 and $0.2 million paid in 2010). The Company performed a fair value analysis and the purchase price
was allocated to the acquired assets based on their fair values resulting in $0.3 million in goodwill being recorded. The fair value analysis was
finalized in January 2010.
SES-CHEM Acquisition. On August 3, 2009, the Company acquired its partner’s 51% interest in SES-CHEM Company Limited (“SESCHEM”), a provider of environmental services in Thailand, for $0.1 million in cash. Subsequent to the transaction, the Company owns all of the
issued and outstanding shares of SES-CHEM. The Company performed a fair value analysis and the purchase price was allocated to the acquired
assets and liabilities based on their fair values resulting in no goodwill being recorded. The fair value analysis of assets and liabilities acquired
was finalized in October 2009.
V & A Acquisition. On May 21, 2009, the Company acquired a controlling interest in V&A Commodity Traders, Inc. (“V&A”), a sugar
trading business, for $4.0 million. The Company’s purchase price included cash consideration of $1.3 million and forgiveness of a note due from
V&A of $2.7 million. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities
based on their fair values resulting in no goodwill being recorded. The fair value analysis of assets and liabilities acquired was finalized in June
2009.
Rivers Edge Acquisition. On November 15, 2007, the Company acquired all of the issued and outstanding shares of Rivers Edge
Services, Inc. and Kemp’s Rivers Edge Vactor Services, Inc. (collectively referred to as “Rivers Edge”), providers of remediation, demolition,
and environmental services in the pacific northwestern United States, for $4.2 million in cash. The selling stockholder of Rivers Edge has the
opportunity to receive additional consideration of up to $4.8 million based upon certain performance measures over the period from the date of
acquisition through December 31, 2011, which will be recognized by the Company as compensation expense in the period earned. As of
December 31, 2011, no additional consideration has been earned by the selling stockholder.
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SRI Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Solid Resources, Inc. and Solid
Resources, LLC (collectively referred to as “SRI”), providers of environmental services in the southeastern United States. The selling
stockholder of SRI has the opportunity to receive additional consideration of up to $39.5 million based upon certain performance measures over
the period from the date of acquisition through September 30, 2011, which will be recognized by the Company as additional cost of the
acquisition when the contingency is resolved and when any additional consideration is distributable. During the year ended December 31, 2011,
the Company paid $0.1 million of additional consideration in accordance with the acquisition agreement. During the year ended December 31,
2009, the Company paid $2.1 million of additional consideration in accordance with the acquisition agreement. As of December 31, 2011, the
Company has paid $6.1 million, in the aggregate, of additional consideration, which was recorded as additional goodwill.
Link Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Link Associates International
Global Limited (“Link”), a provider of environmental consulting services in the United Kingdom for £2.3 million ($4.5 million) in cash. The
selling stockholder of Link had the opportunity to receive additional consideration of up to £2.8 million based upon certain performance
measures during the period from the date of acquisition through May 31, 2010. During the year ended December 31, 2009, the Company had
paid £61,560 ($0.1 million), in the aggregate, of additional consideration, which was recorded as additional goodwill. No additional
consideration was earned or paid during the year ended December 31, 2010.
RMA Acquisition. On October 1, 2006, the Company acquired all of the issued and outstanding shares of Response Management
Associates, Inc. (“RMA”), a provider of environmental consulting services for $12.5 million. The selling stockholder of RMA has the
opportunity to receive additional consideration of up to $8.5 million based upon certain performance measures over the period from the date of
the acquisition through September 30, 2012, which will be recognized by the Company as additional cost of the acquisition when the
contingency is resolved and when any additional consideration is distributable. During the years ended December 31, 2010 and 2009, the
Company paid $6.4 million and $0.5 million, respectively, of additional consideration in accordance with the acquisition agreement. As of
December 31, 2010, the Company had paid $8.5 million, in the aggregate, of additional consideration, which was recorded as additional
goodwill.
Purchase Price Allocation. The allocation of the purchase price for the Company’s acquisitions for the years ended December 31 was as
2011
Trade and other receivables
Other current assets
Investments, at Equity, and Advances to 50% or Less Owned Companies
Goodwill
Intangible Assets
Other Assets
Accounts payable and other current liabilities
Long-Term Debt
Deferred Income Taxes
Other Liabilities
Noncontrolling interests in subsidiaries
Purchase price (1)
(1)
$
2,882
1,105
(11,920)
137,533
3,264
6,602
3,500
(3,578)
(37,400)
(1,116)
—
(10,284)
$ 90,588
Purchase price is net of cash acquired (totaling $5.3 million, $1.7 million and $1.9 million in 2011, 2010 and 2009, respectively).
136
2010
2009
302
492
(57,255)
51,771
7,276
2,841
230
(215)
—
201
—
—
$ 5,643
$ 6,515
2,341
(5,187)
1,931
2,858
40
204
(1,512)
—
(17)
(45)
(3,043)
$ 4,085
$
Table of Contents
Subsequent Event. Subsequent to December 31, 2011, the Company reached an agreement to acquire 18 lift boats from Superior Energy
Services, LLC and affiliates for $134.0 million plus a to be determined amount for working capital. The agreement is subject to certain
conditions, including regulatory approval, and is expected to be completed prior to the end of the second quarter of 2012.
Equipment Additions. The Company’s capital expenditures were $332.3 million, $250.6 million and $180.0 million in 2011, 2010 and
2009, respectively. Major equipment placed in service for the years ended December 31 were as follows (unaudited):
Offshore Support Vessels:
Crew
Mini-Supply
Specialty
Helicopters:
Light helicopters – single engine
Light helicopters – twin engine
Medium helicopters
Heavy helicopters
Inland River dry cargo barges
Inland River liquid tank barges
Inland River towboats
Harbor Tugs
(1)
Excludes eight RORO vessels acquired in the G&G Shipping Acquisition and 29 wind farm utility vessels acquired in the Windcat Acquisition.
137
2011 (1)
2010
2009
—
2
1
—
3
—
1
—
—
1
1
1
—
1
3
1
3
4
1
9
55
2
—
1
—
—
—
5
1
6
113
17
—
1
—
2
3
1
2
8
—
—
3
—
3
Table of Contents
Equipment Dispositions. The Company sold property and equipment for $101.8 million, $361.7 million, and $103.7 million in 2011, 2010
and 2009, respectively. Major equipment dispositions for the years ended December 31 were as follows (unaudited):
2011
(1)
Offshore Support Vessels:
Crew
Mini-supply
Standby Safety
Supply
Towing supply
Specialty
Helicopters:
Light helicopters – single engine
Light helicopters – twin engine
Medium helicopters
Heavy helicopters
Inland River dry cargo and deck barges
Inland River liquid tank barges
Inland River towboats
Tankers
Harbor tugs
2009
2010
(2)
1
6
—
1
1
1
1
11
3
2
1
—
—
2
—
8
1
9
4
—
1
2
2
19
3
3
2
3
11
6
1
1
1
2
—
—
2
—
—
2
60
—
—
2
—
1
1
4
—
1
6
5
—
3
—
4
—
(1)
Excludes four crew and one mini-supply vessels operated by Offshore Marine Services’ Mexican joint venture (see Note 5) and includes one helicopter previously removed from service.
(2)
Excludes one specialty vessel contributed to the Sea-Cat Crewzer joint venture (see Note 5) and one mini-supply vessel and two helicopters removed from service and includes the sale of
one harbor tug previously removed from service.
Equipment dispositions during the year ended December 31, 2011 included the sale and leaseback of one anchor handling towing supply
vessel for $36.3 million with a lease terms of 84 months. Gains of $7.7 million related to the sale-leaseback were deferred and are being
amortized over the minimum lease period (see Note 1). The Company also financed the sale of one offshore support vessel and one helicopter to
certain of the Company’s 50% or less owned companies for $19.1 million, in the aggregate (see Note 5). Gains of $6.6 million from these sales
were deferred and will be recognized as payments are received under the terms of the financing (see Note 1).
Equipment dispositions during the year ended December 31, 2010 included the sale and leaseback of one anchor handling towing supply
vessel and two double-hull product tankers for $217.3 million, in the aggregate, with lease terms ranging from 60 to 158 months. Gains of $75.7
million related to these sale-leasebacks were deferred and are being amortized over their respective minimum lease periods (see Note 1). The
Company also
138
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financed the sale of one crew vessel to an unrelated third party for $1.5 million and deferred gains of $1.2 million from the sale that will be
recognized as payments are received under the terms of the financing (see Note 1). The Company sold one anchor handling towing supply vessel
and 60 dry cargo barges to certain of the Company’s 50% or less owned companies for $59.1 million, in the aggregate. Gains of $1.0 million
from these sales were deferred (see Note 1) as a result of uncalled capital commitments (see Note 5).
With respect to the sale-leaseback of the two double-hull product tankers in 2010, each tanker was sold and leased back by a wholly-owned
subsidiary of the Company with minor continuing obligations attributable to SEACOR. The lease payments, lease periods and option renewal
periods of the leasebacks are identical to and offset existing long-term bareboat charter-out arrangements the Company has with a customer. As a
result, the future profits recognized from these two tankers will consist entirely of the amortization of the deferred gains of $69.3 million at the
time of the sale-leaseback. The selling subsidiaries’ ability to meet their obligations under the leasebacks is dependent upon the offsetting
bareboat charter-out arrangements with the customer.
Equipment dispositions during the year ended December 31, 2009 included the sale and leaseback of three inland river towboats for $17.7
million, in the aggregate, with lease terms of 84 months. Gains of $14.1 million related to these sale-leasebacks were deferred and are being
amortized over the minimum lease period (see Note 1). The Company also financed the sale of five crew vessels to unrelated third parties for
$14.1 million, in the aggregate (see Note 5). Gains of $3.4 million from these sales were deferred and will be recognized as payments are
received under the terms of the financing (see Note 1).
Subsequent Event. Environmental Services’ business is conducted through SEACOR Environmental Services Inc. (“SES”) and O’Brien’s
Response Management Inc. (“ORM”). SES includes National Response Corporation, one of the largest providers of oil spill response services in
the United States; NRC Environmental Services Inc., a leading provider of environmental and industrial services on the West Coast of the United
States; SEACOR Response Ltd., which provides oil spill and emergency response services to customers in various international markets; and
certain other subsidiaries (collectively the “SES Business”). On February 7, 2012, SEACOR announced it had reached an agreement to sell the
SES Business to J.F. Lehman & Company, a leading, middle-market private equity firm, for $97.0 million, subject to a post-closing working
capital adjustment and contingent consideration equal to a portion of revenues generated by any extraordinary oil spill response that occurs
within three years following the closing. The closing of the transaction is conditioned upon the buyer obtaining certain debt financing and other
customary conditions. Either the Company or the buyer may terminate the stock purchase agreement if the closing has not occurred by
March 31, 2012. The transaction does not include ORM, a leading provider of crisis and emergency preparedness and response services.
Summarized selected operating results of the SES Business for the years ended December 31 were as follows (in thousands):
Operating Revenues
Operating Income
Segment Profit
139
2011
2010
2009
$131,346
13,012
13,030
$681,082
139,771
140,392
$104,478
3,906
4,210
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5.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
Investments, at equity, and advances to 50% or less owned companies as of December 31 were as follows (in thousands):
Illinois Corn Processing
SCFCo Holdings
DHC
Hawker Pacific
MexMar
Bunge-SCF Grain
Avion
SeaJon
Nautical Power
Dynamic Offshore
Aeroleo
Sea-Cat Crewzer
Era do Brazil
C-Lift
Soylutions
Avion Logistics Limited
Other
Ownership
2011
2010
50.0%
50.0%
50.0%
34.2%
49.0%
50.0%
39.1%
50.0%
50.0%
20.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
20.0% – 50.0%
$ 32,046
25,302
25,128
23,807
17,118
16,577
15,171
12,284
10,248
10,149
9,160
7,493
6,744
6,249
—
—
34,362
$ 251,838
$ 31,621
23,810
19,701
24,787
—
150
9,336
—
12,551
—
—
10,483
—
7,605
8,244
570
33,529
$ 182,387
Combined Condensed Financials. Summarized financial information for the Company’s investments, at equity, as of and for the years
ended December 31 was as follows (in thousands):
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Operating Revenues
Costs and Expenses:
Operating and administrative
Depreciation
Operating Income
Net Income (Loss)
140
2011
2010
$373,360
550,843
253,502
236,994
$296,557
409,834
153,643
255,842
2011
2010
2009
$791,425
$360,923
$259,720
733,239
35,990
769,229
$ 22,196
$ (1,932)
279,199
28,291
307,490
$ 53,433
$ 37,146
173,230
22,122
195,352
$ 64,368
$ 43,631
Table of Contents
As of December 31, 2011 and 2010, cumulative undistributed net earnings of 50% or less owned companies accounted for by the equity
method included in the Company’s consolidated retained earnings were $18.7 million and $53.6 million, respectively.
Illinois Corn Processing. On November 20, 2009, the Company and an ingredients and distillery product manufacturer formed Illinois
Corn Processing LLC (“ICP”), a 50-50 joint venture to own and operate an alcohol manufacturing facility dedicated to the production of alcohol
for beverage, industrial and fuel applications. The Company’s joint venture partner contributed a previously shuttered manufacturing plant and
then immediately sold a 50% interest to the Company for $15.0 million in cash. The Company also provided to ICP a $10.0 million term loan
with a maturity in November 2014 and a $20.0 million revolving line of credit with a maturity in November 2012 subject to certain borrowing
restrictions. During the year ended December 31, 2010, the Company and its joint venture partner each contributed an additional $1.0 million to
acquire certain equipment. During the years ended December 31, 2010 and 2009, the Company advanced $8.0 million and $2.0 million,
respectively, under the term loan. During the years ended December 31, 2011 and 2010, the Company received principal repayments of $1.7
million and $2.4 million, respectively. During the years ended December 31, 2011 and 2010, the Company made net advances of $4.3 million
and $9.1 million, respectively, under the revolving line of credit. As of December 31, 2011, the outstanding balances under the term loan and
revolving line of credit were $6.6 million and $13.7 million, respectively, inclusive of any unpaid and accrued interest. On January 31, 2012, the
Company acquired an additional 20% interest in ICP for $9.1 million. ICP had operating revenues of $238.2 million and $117.3 million for the
years ended December 31, 2011 and 2010, respectively.
SCFCo Holdings. SCFCo Holdings LLC (“SCFCo”) was established to operate towboats and dry cargo barges on the Parana-Paraguay
Rivers and a terminal facility at Port Ibicuy, Argentina. At various times, SCFCo has agreed to expand its operations through additional capital
contributions and bank financing. During the years ended December 31, 2011 and 2010, the Company contributed additional capital of $0.8
million and $10.2 million, respectively, to fund SCFCo’s expansion. The Company made no capital contributions during the year ended
December 31, 2009. Additionally, during the years ended December 31, 2011 and 2010, the Company provided net temporary working capital
advances of $0.3 million and $2.2 million, respectively, of which $2.3 million remained outstanding as of December 31, 2011. During the year
ended December 31, 2010, the Company sold 60 barges to the joint venture for proceeds of $25.8 million. The Company sold no equipment to
the joint venture in 2011 and 2009.
DHC. A wholly owned subsidiary of the Company, Era DHS LLC, acquired 49% of the capital stock of Dart Helicopter Services LLC
(“Dart”), a sales, marketing and parts manufacturing organization based in North America that engineers and manufactures after-market parts
and equipment for sale to helicopter manufacturers and operators. During 2009, the Company provided a $0.3 million loan to Dart with a
maturity of June 2012 and an annual interest rate of 5%, which is payable quarterly and the principal due at maturity. On February 28, 2011, the
Company made an additional investment of $5.0 million in Dart and, on July 31, 2011, contributed its ownership in Dart to Dart Holding
Company Ltd. (“DHC”) in exchange for a 50% interest in DHC and a note receivable of $5.1 million. The note receivable bears an interest rate
of 4.0% per annum, required quarterly principal and interest payments and matures July 31, 2023. During the years ended December 31, 2011,
2010 and 2009, the Company purchased $2.3 million, $1.1 million and $1.1 million, respectively of products from Dart and DHC. During the
years ended December 31, 2010 and 2009, the Company received management fees of $0.2 million and $0.2 million, respectively. The
management fees earned during the year ended December 31, 2011 were not material.
Hawker Pacific. On December 15, 2010, the Company acquired a 32.5% interest in Hawker Pacific Airservices, Limited (“Hawker
Pacific”), an aviation sales and support organization and a distributor of aviation components from some of the world’s leading manufacturers,
for $25.0 million in cash. On June 1, 2011, the Company contributed its ownership in Avion Logistics Limited (“ALL”), valued at $2.0 million,
to Hawker Pacific for an additional 1.7% ownership interest bringing its total ownership percentage to 34.2%. The Company performed a fair
value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill. The
fair value analysis was completed in December 2011.
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MexMar. On July 1, 2011, Mantenimiento Express Maritimo, S.A.P.I. de C.V. (“MexMar”), a Mexican joint venture that operates six
offshore support vessels in Mexico, executed a business reorganization plan and issued an additional equity interest to an unrelated third party
for $17.1 million in cash. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4
million gain, net of tax, which is included in equity in earnings in 50% or less owned companies in the accompanying consolidated statements of
income, and received $14.9 million on the net repayment of outstanding advances from MexMar. Following the reorganization the Company has
a 49% interest in MexMar. During the year ended December 31, 2011, the Company received $0.1 million of vessel management fees from this
joint venture.
Bunge-SCF Grain. On September 29, 2010, the Company formed a 50/50 joint venture Bunge-SCF Grain LLC (“Bunge-SCF”) with
Bunge North America, Inc. to construct a terminal grain elevator in Fairmont City, Illinois. During the years ended December 31, 2011 and
2010, the Company and its partner each contributed $17.3 million and $0.2 million, respectively in cash to the joint venture. The terminal grain
elevator is expected to be completed in the second quarter of 2012. In addition, beginning July 29, 2011, Bunge-SCF Grain began operating and
managing the Company’s grain storage and handling facility in McLeansboro, Illinois, for which the Company received $0.3 million in rental
income.
Avion. On February 27, 2006, the Company purchased a 27.8% interest in Avion Pacific Limited (“Avion”), a distributor of aircraft and
aircraft related parts for $2.6 million and during the year ended December 31, 2008, invested an additional $1.0 million to increase its ownership
to 39.1%. During the year ended December 31, 2011 and 2010, the Company made advances of $9.5 million and $2.0 million, respectively, to
Avion. The Company made no advances to Avion during the year ended December 31, 2009. For the years ended December 31, 2011, 2010 and
2009, the Company received repayments of $4.6 million, $0.9 million and $1.1 million, respectively, from Avion on the advances. As of
December 31, 2011 and 2010, the Company had outstanding loans to Avion totaling $9.7 million and $4.8 million, respectively.
SeaJon. On April 22, 2010, the Company formed a 50/50 joint venture SeaJon LLC (“SeaJon”) with Great Lakes ATB, LLC. Each partner
in SeaJon is party to a contract to construct an articulated tug-barge and SeaJon was established to own the completed articulated tug-barge,
which will be used in the Great Lakes trade. On April 7, 2011, each partner contributed its ownership interest in the newly constructed tug in
exchange for an ownership interest in SeaJon. As of December 31, 2011, the tug was idle pending the completion of the barge in the first quarter
of 2012. Upon completion and acceptance, the barge will also be contributed to SeaJon by the partners in exchange for an additional ownership
interest.
Nautical Power. On June 23, 2003, the Company and another offshore operator formed Nautical Power, LLC (“Nautical Power”) a 50/50
joint venture to operate one offshore support vessel. Nautical Power bareboat charters the vessel from a leasing company and that charter
terminates in 2012. The Company is a guarantor of 50% of the charter payments and its guarantee reduces as payments are made. As of
December 31, 2011, the Company’s guarantee was $0.5 million.
Dynamic Offshore Drilling. On April 4, 2011, the Company acquired a 20% interest in Dynamic Offshore Drilling Ltd. (“Dynamic”), a
company established to construct and operate jack-up drilling rigs, for $10.0 million. The first jack-up drilling rig is currently under construction
in Singapore and is scheduled for delivery in the first quarter of 2013.
Aeroleo. On July 1, 2011, the Company acquired a 50% economic interest and a 20% voting interest in Aeroleo Taxi Aereo S/A
(“Aeroleo”), a Brazilian entity that provides helicopter transport services to the Brazilian offshore oil and gas industry, for $4.8 million in cash.
The Company and its partner each loaned Aeroleo $6.0 million at an interest rate of 6% per annum. The note requires monthly interest payments
and matures in June 2013. The Company leases helicopters to Aeroleo and for the period July 1, 2011 through December 31, 2011, the Company
recognized $14.0 million of operating revenues from these leases of which $3.0 million was outstanding as of December 31, 2011.
Sea-Cat Crewzer. On July 27, 2009, the Company and another offshore support vessel operator formed Sea-Cat Crewzer LLC (“Sea-Cat
Crewzer”), a 50-50 joint venture to own and operate two high speed offshore
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catamaran crew boats. Each partner contributed one high speed offshore catamaran crew boat and cash with a combined value of $17.3 million.
The Company contributed one high speed offshore catamaran crew boat valued at $14.7 million and cash of $2.6 million. In addition,
immediately prior to the formation of the joint venture, the Company sold one high speed offshore catamaran crew boat to its joint venture
partner for $16.9 million, who then contributed the vessel to the joint venture along with $0.4 million in cash. During the year ended
December 31, 2010, Sea-Cat Crewzer entered into a $22.0 million term loan and upon funding distributed $9.0 million to each of its partners.
The Company is a guarantor of 50% of Sea-Cat Crewzer’s debt and the amount of the guarantee declines as principal payments are made and
will terminate when the debt is repaid. As of December 31, 2011, the Company’s guarantee was $9.8 million. During the years ended
December 31, 2011, 2010 and 2009, the Company received $0.7 million, $0.7 million and $0.3 million, respectively, of vessel management fees
from this joint venture.
Era do Brazil. On July 1, 2011, the Company and its partner each contributed $4.8 million in cash to Era do Brazil LLC (“Era do Brazil”),
a 50-50 joint venture. Era do Brazil immediately acquired a helicopter, subject to a lease to Aeroleo, from the Company for $11.5 million ($9.5
million in cash and a $2.0 million note payable). The note payable bears an interest rate of 7.0% per annum, requires 60 monthly principal and
interest payments, and is secured by the helicopter and the Aeroleo lease. The Company provides maintenance services to Era do Brazil and for
the period July 1, 2011 through December 31, 2011, the Company recognized $0.3 million of operating revenues from these services all of
which was outstanding as of December 31, 2011.
C-Lift. On April 28, 2006, the Company and another offshore operator formed C-Lift LLC (“C-Lift”) a 50/50 joint venture established to
construct and operate two lift boats. The Company is a guarantor of 50% of C-Lift’s outstanding debt and its guarantee declines as principal
payments are made and will terminate when the debt is repaid. The debt matures in 2015. As of December 31, 2011, the Company’s guarantee
was $12.8 million.
Soylutions. On July 29, 2011, the Company obtained a 100% controlling interest in Soylutions through its acquisition of its partner’s 50%
interest for $11.9 million in cash (see Note 4). Upon the acquisition, the Company adjusted its investment in Soylutions to fair value resulting in
the recognition of a gain of $2.3 million, net of tax, which is included in equity in earnings in 50% or less owned companies in the
accompanying consolidated statements of income.
Avion Logistics Limited. On June 1, 2011, the Company acquired a 100% controlling interest in Avion Logistics Limited (“ALL”) through
its acquisition of its partner’s 50% interest for $1.0 million in cash. Upon acquisition, the Company adjusted its investment in ALL to fair value
resulting in the recognition of a gain of $0.3 million, net of tax, which is included in equity in earnings of 50% or less owned companies.
Following this change in control, the Company contributed its ownership interest in ALL to Hawker Pacific for an additional 1.7% interest in
Hawker Pacific.
Other. The Company has other joint ventures within its Offshore Marine Services, Aviation Services, Inland River Services and
Environmental Services business segments.
The Company’s other Offshore Marine Services joint ventures operate six vessels, five owned and one bareboat chartered-in. During the
year ended December 31, 2011 the Company made no additional capital contributions to these joint ventures. During the years ended
December 31, 2010 and 2009, the Company made aggregate additional capital contributions to these joint ventures of $2.7 million and $0.3
million, respectively. Certain of these offshore marine joint ventures obtained bank debt to finance the acquisition of offshore support vessels
from the Company. Under the terms of the debt, the bank has the authority to require the parties of these joint ventures to fund uncalled capital
commitments, as defined in the joint ventures’ partnership agreements, under certain circumstances. In such event, the Company would be
required to contribute its allocable share of uncalled capital, which was $2.5 million, in the aggregate, as of December 31, 2011. During the year
ended December 31, 2011, the Company sold one offshore marine vessel to one of its joint ventures for $7.6 million. The Company manages
these vessels on behalf of the joint ventures and guarantees the outstanding charter receivables of one of the joint ventures if a customer defaults
in payment and the Company either fails to take enforcement action against the defaulting customer or fails to assign its right of recovery against
the defaulting
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customer. As of December 31, 2011, the Company’s contingent guarantee of outstanding charter receivables was $0.9 million. During the years
ended 2011, 2010 and 2009, the Company received $0.6 million, $0.3 million and $0.5 million, respectively, of vessel management fees from
these joint ventures.
The Company’s other Aviation Services joint ventures include a flight training center and a helicopter operation in Spain. During the years
ended December 31, 2011, 2010 and 2009, the Company provided helicopter, management and other services totaling $0.7 million, $0.6 million
and $0.4 million, respectively, and paid simulator fees of $0.1 million, $0.3 million and $0.1 million in 2011, 2010 and 2009, respectively to one
of these joint ventures. During the year ended December 31, 2011 and 2010, the Company advanced $1.2 million and $3.2 million, respectively
to one of these joint ventures.
The Company’s other Inland River Services joint ventures operate six inland river towboats, a dry cargo vessel and a fabrication facility.
During the year ended December 31, 2010, the Company made additional capital contributions of $0.2 million in the aggregate.
6.
THIRD PARTY NOTES RECEIVABLE
From time to time, the Company engages in lending and leasing activities involving various types of equipment. The Company recognizes
interest income as payments are due, typically monthly, and expenses all costs associated with its lending and leasing activities as incurred.
During the year ended December, 31, 2011, these activities included advances of $22.2 million for two notes receivable secured by fixed wing
aircraft and certain spare parts. Both notes receivable are for five years, one of which requires 59 monthly principal and interest payments and a
final balloon payment, and the other requires quarterly payments of principal and interest, subject to certain prepayment provisions based on the
sale of spare parts. These activities also included an advance of $14.5 million for a note receivable secured by an offshore support vessel that is
managed by the Company. This note receivable requires monthly payments of principal and interest and a final balloon payment. The overall
returns on these notes receivable are uncertain due to certain provisions for additional payments contingent upon future events. As of
December 31, 2011, none of the Company’s third party notes receivable are past due or in default and the Company has made no provisions for
credit losses.
7.
CONSTRUCTION RESERVE FUNDS
The Company has established, pursuant to Section 511 of the Merchant Marine Act, 1936, as amended, construction reserve fund accounts
subject to agreements with the Maritime Administration. In accordance with this statute, the Company is permitted to deposit proceeds from the
sale of certain vessels into the construction reserve fund accounts and defer the taxable gains realized from the sale of those vessels. Qualified
withdrawals from the construction reserve fund accounts are only permitted for the purpose of acquiring qualified U.S.-flag vessels as defined in
the statue and approved by the Maritime Administration. To the extent that sales proceeds are reinvested in replacement vessels, the carryover
depreciable tax basis of the vessels originally sold is attributed to the U.S.-flag vessels acquired using such qualified withdrawals. The
construction reserve funds must be committed for expenditure within three years of the date of sale of the equipment, subject to two one-year
extensions which can be granted at the discretion of the Maritime Administration, or be released for the Company’s general use as nonqualified
withdrawals. For nonqualified withdrawals, the Company is obligated to pay taxes on the previously deferred gains at the prevailing statutory tax
rate plus a 1.1% penalty tax and interest thereon for the period such taxes were deferred.
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As of December 31, 2011 and 2010, the Company’s construction reserve funds of $250.4 million and $314.3 million, respectively, are
classified as non-current assets in the accompanying consolidated balance sheets as the Company has the intent and ability to use the funds to
acquire equipment. Construction reserve fund transactions for the years ended December 31 were as follows (in thousands):
Withdrawals
Deposits
8.
2011
2010
2009
$(82,553)
18,642
$(63,911)
$(56,727)
97,846
$ 41,119
$(70,009)
55,269
$(14,740)
INCOME TAXES
Income before income tax expense (benefit) and equity in earnings of 50% or less owned companies derived from U.S. and foreign
companies for the years ended December 31 were as follows (in thousands):
United States
Foreign
Eliminations and other
2011
2010
2009
$65,831
(7,508)
(4,929)
$53,394
$347,423
17,141
8,915
$373,479
$151,814
50,975
12,225
$215,014
As of December 31, 2011, cumulative undistributed net earnings of foreign subsidiaries included in the Company’s consolidated retained
earnings were $131.2 million.
The Company files a consolidated U.S. federal tax return. The components of income tax expense (benefit) for the years ended
December 31 were as follows (in thousands):
Current:
State
Federal
Foreign
Deferred:
State
Federal
Foreign
145
2011
2010
2009
$ 2,505
14,977
10,938
28,420
$ 12,115
126,992
11,938
151,045
$ 3,278
5,723
10,486
19,487
(1,845)
(5,285)
(105)
(7,235)
$21,185
(1,386)
(9,035)
50
(10,371)
$140,674
1,901
61,152
(48)
63,005
$82,492
Table of Contents
The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax
rate for the years ended December 31:
Statutory rate
Non-deductible expenses
State effective tax rate changes
State taxes
Other
2011
2010
2009
35.0%
1.8%
(3.3)%
2.9%
3.3%
39.7%
35.0%
0.6%
(0.4)%
2.2%
0.3%
37.7%
35.0%
1.5%
1.0%
0.9%
0.0%
38.4%
During the years ended December 31, 2011, 2010 and 2009, the Company recognized an income tax benefit of $1.7 million, an income tax
benefit of $1.7 million, and an income tax expense of $2.2 million, respectively, on adjustments to state tax liabilities resulting from changes in
state tax apportionment factors.
The components of the net deferred income tax liabilities for the years ended December 31 were as follows (in thousands):
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries
Investments in 50% or Less Owned Companies
Long-term Debt
Other
Total deferred tax liabilities
Deferred tax assets:
Foreign tax credit carryforwards
Share award plans
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Net deferred tax liabilities
2011
2010
$514,764
39,640
14,675
15,627
14,591
599,297
$510,415
42,652
9,186
15,627
18,406
596,286
4,697
10,473
27,848
43,018
(7,526)
35,492
$563,805
11,007
4,802
25,698
41,507
(7,659)
33,848
$562,438
As of December 31, 2011, the Company has foreign tax credit carryforwards of $4.7 million that expire from 2012 through 2015. The
Company believes it is more likely than not that the Company’s foreign tax credit carryforwards, with the exception of $3.1 million, will be
utilized through the turnaround of existing temporary differences, future earnings, tax strategies or a combination thereof.
During the year ended December 31, 2011, the Company decreased its valuation allowance for state net operating loss carryforwards by
$0.2 million to $4.4 million.
The Company records an additional income tax benefit or expense based on the difference between the fair market value of share awards at
the time of grant and the fair market value at the time of vesting or exercise. For
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the years ended December 31, 2011 and 2010, an additional net income tax benefit was recorded in stockholders’ equity of $1.8 million and $4.9
million, respectively. For the year ended December 31, 2009, an additional net income tax expense was recorded in stockholders’ equity of $0.2
million.
9.
LONG-TERM DEBT
The Company’s borrowings as of December 31 were as follows (in thousands):
7.375% Senior Notes (excluding unamortized discount of $1.3 million)
5.875% Senior Notes (excluding unamortized discount of $0.2 million)
Title XI Bonds (excluding unamortized discount of $10.3 million)
SEACOR Revolving Credit Facility
ERA Group Inc. Senior Secured Revolving Credit Facility
Other (excluding unamortized discount of $1.0 million)
Portion due within one year (1)
Debt discount, net
(1)
2011
2010
$ 233,500
176,519
95,906
175,000
252,000
116,423
1,049,348
(41,091)
(12,807)
$ 995,450
$233,500
178,724
100,760
125,000
—
87,805
725,789
(14,618)
(13,744)
$697,427
Excludes $176.5 million, in principal amount, of the Company’s 5.875% Senior Notes due in 2012 as the Company has the ability and current intent to repay the outstanding balance by
drawing on the SEACOR Revolving Credit Facility, which matures in 2013.
The Company’s long-term debt maturities for the years ended December 31 are as follows (in thousands):
2012
2013
2014
2015
2016
$
41,091
365,810
14,957
44,962
264,689
317,839
$1,049,348
7.375% Senior Notes. On September 24, 2009, SEACOR issued $250.0 million aggregate principal amount of its 7.375% Senior Notes
due October 1, 2019 (the “7.375% Senior Notes”) and received net proceeds of $245.9 million. The 7.375% Senior Notes were issued under a
supplemental indenture dated as of September 24, 2009 (the “2009 Supplemental Indenture”) to the base indenture relating to SEACOR’s senior
debt securities, dated as of January 10, 2001, between SEACOR and U.S. Bank National Association, as trustee. Interest on the 7.375% Senior
Notes is payable semi-annually on April 1 and October 1 of each year. The 7.375% Senior Notes may be redeemed at any time, in whole or in
part, at a price equal to the principal amount, plus accrued and unpaid interest to the date of redemption, plus a specified “make-whole”
premium. The 2009 Supplemental Indenture contained covenants including, among others, limitations on liens and sale and leasebacks of certain
Principal Properties, as defined, and certain restrictions on SEACOR consolidating with or merging into any other Person, as defined. During the
year ended December 31, 2010, the Company purchased $16.5 million, in principal amount, of its 7.375% Senior Notes for $17.3 million,
resulting in a loss on debt extinguishment of $1.1 million.
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2.875% Convertible Debentures. On December 17, 2004, SEACOR completed the sale of $250.0 million aggregate principal amount of its
2.875% Convertible Debentures due December 15, 2024 (the “2.875% Convertible Debentures”). During 2009, the Company’s outstanding
Convertible Debentures were purchased through open market transactions, converted into shares of SEACOR common stock, par value $0.01
per share (“Common Stock”) by the debenture holders, or redeemed in cash. Total consideration paid by the Company on these settlements of
the Convertible Debentures was $253.8 million, including 2,918,977 shares of Common Stock valued at $217.2 million and $36.6 million in
cash. Consideration of $240.3 million, including Common Stock valued at $205.7 million and $34.6 million in cash, was allocated to the
settlement of long-term debt resulting in a debt extinguishment loss of $9.4 million, which is included in the accompanying consolidated
statements of income. Consideration of $13.5 million, including Common Stock valued at $11.5 million and $2.0 million in cash, was allocated
to the purchase of the conversion option embedded in the Convertible Debentures as included in the accompanying consolidated statements of
changes in equity.
5.875% Senior Notes. In 2002, SEACOR sold $200.0 million aggregate principal amount of its 5.875% Senior Notes due October 1, 2012
(the “5.875% Senior Notes”). The 5.875% Senior Notes were issued under a supplemental indenture dated as of September 27, 2002 (the “2002
Supplemental Indenture”) to the base indenture relating to SEACOR’s senior debt securities, dated as of January 10, 2001, between SEACOR
and U.S. Bank National Association, as trustee. Interest on the 5.875% Senior Notes is payable semi-annually on April 1 and October 1 of each
year. The 5.875% Senior Notes may be redeemed at any time, in whole or in part, at a price equal to the principal amount, plus accrued and
unpaid interest to the date of redemption, plus a specified “make-whole” premium. The 2002 Supplemental Indenture contained covenants
including, among others, limitations on liens and sale and leasebacks of certain Principal Properties, as defined, and certain restrictions on
SEACOR consolidating with or merging into any other Person, as defined. During the year ended December 31, 2011, the Company purchased
$2.2 million, in principal amount, of its 5.875% Senior Notes for $2.3 million, resulting in a loss on debt extinguishment of $0.1 million. During
the year ended December 31, 2010, the Company purchased $2.4 million, in principal amount, of its 5.875% Senior Notes for $2.5 million,
resulting in a loss on debt extinguishment of $0.1 million. Subsequent to December 31, 2011, the Company purchased $5.5 million, in principal
amount, of its 5.875% Senior Note for $5.7 million, resulting in a loss on debt extinguishment of $0.2 million.
Title XI Bonds. Five double-hull product and chemical tankers were financed through the issuance of seven U.S. Government Guaranteed
Ship Financing Bonds (the “Title XI Bonds” or “Title XI financing”) bearing interest at rates ranging from 6.50% to 7.54% with semi-annual
principal and interest payments and maturing through June 2024. During the year ended December 31, 2010, the Company redeemed all of the
outstanding bonds on two of the double-hull product and chemical tankers, in principal amount of $61.9 million, for an aggregate purchase price
of $63.0 million, including a make-whole premium, resulting in a loss on debt extinguishment of $0.2 million. Following the redemption, three
series of the Title XI bonds remained outstanding, one each for three double-hull product and chemical tankers (the “Title XI tankers”) owned by
subsidiaries of the Company (the “Title XI companies”), each with an interest rate of 6.50%.
A percentage of earnings attributable to each of the Title XI tankers’ operations is required to be deposited into Title XI reserve fund bank
accounts. Cash held in these accounts is invested as prescribed by Title XI financing agreements. Withdrawals from these accounts are permitted
for limited purposes, subject to the prior approval of the U.S. Maritime Administration. As of December 31, 2011 and 2010, the Title XI reserve
fund account balances were $9.6 million and $9.6 million, respectively. During the year ended December 31, 2010, $7.0 million of Title XI
reserve funds were released following the redemption of the bonds, as described above.
The Title XI financing agreements contain covenants restricting cash distributions subject to certain financial tests. Failure to meet these
financial tests, among other things, restricts Title XI companies from (1) distributing capital; (2) paying dividends; (3) increasing employee
compensation and paying other indebtedness; (4) incurring additional indebtedness; (5) making investments and (6) acquiring fixed assets. Cash
distributions (as defined in the Title XI financing agreements) from a Title XI company are prohibited until such
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company achieves certain levels of working capital. As of December 31, 2011 and 2010, the Title XI companies held $18.7 million and
$12.7 million in restricted cash that was limited in use for the operation of the tankers and cannot be used to fund the Company’s general
working capital requirements. As of December 31, 2011, the Title XI companies had net assets of $82.8 million.
In the event of default (as defined in the Title XI financing agreements), all of the Title XI tankers, in addition to the assignment of
earnings relating to those vessels and the funds on deposit in the Title XI reserve fund accounts, serve as collateral for the repayment of the Title
XI Bonds. The aggregate net book value as of December 31, 2011 of the Title XI tankers was $143.5 million.
SEACOR Revolving Credit Facility. The Company has a $405.0 million unsecured revolving credit facility that matures in November
2013. Advances under the facility are available for general corporate purposes. This facility was reduced by 10% of the maximum committed
amount of $450.0 million in November 2011 and will be reduced by a further 10% in November 2012. Interest on advances is charged at a rate
per annum of LIBOR plus an applicable margin of 60 basis points through November 2011 and 67.5 basis points thereafter. A quarterly
commitment fee is payable based on the average unfunded portion of the committed amount at the rate of 17.5 basis points through November
2011 and at the rate of 22.5 basis points thereafter. The revolving credit facility contains various restrictive covenants including interest
coverage, secured debt to total capitalization, funded debt to total capitalization ratios, as well as other customary covenants, representations and
warranties, funding conditions and events of default, including a cross-default as defined in the credit agreement. During the year ended
December 31, 2011, the Company drew $50.0 million on the revolving credit facility. As of December 31, 2011, the Company had $175.0
million of outstanding borrowings under the revolving credit facility and the remaining availability under this facility was $228.5 million, net of
issued letters of credit of $1.5 million.
ERA Group Inc. Senior Secured Revolving Credit Facility. On December 22, 2011, Era Group Inc. (“Era”), a subsidiary of SEACOR that
operates its Aviation Services business segment, entered into a $350.0 million senior secured revolving credit facility that matures in December
2016 and is secured by substantially all of the tangible and intangible assets of Era. Advances under the senior secured revolving credit facility
are available for general corporate purposes and can be used to issue up to $50.0 million in letters of credit. Interest on advances are at the option
of Era of either a “base rate” or LIBOR as defined plus an applicable margin. The “base rate” is defined as the highest of: (a) the Prime Rate, as
defined; (b) the Federal Funds Effective Rate, as defined, plus 50 basis points; or (c) a daily LIBOR, as defined, plus an applicable margin. The
applicable margin is based on Era’s funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined, and
ranges from 100 to 200 basis points on the “base rate” margin and 210 to 335 basis points on the LIBOR margin. The applicable margin as of
December 31, 2011, was 140 basis points on the “base rate” margin and 260 basis points on the LIBOR margin. A quarterly commitment fee is
payable based on the average unfunded portion of the committed amount at a rate based on Era’s funded debt to EBITDA, as defined, and ranges
from 25 to 70 basis points, and as of December 31, 2011 the commitment fee was 50 basis points. The senior secured revolving credit facility
contains various restrictive covenants including interest coverage, funded debt to EBITDA, secured funded debt to EBITDA, funded debt to the
fair market value of owned helicopters, fair market value of mortgaged helicopters to funded debt, fair market value of mortgaged helicopters
registered in the United States to fair market value of all mortgaged helicopters, as well as other customary covenants, representations and
warranties, funding conditions and events of default, all as defined in the senior secured revolving credit facility. In addition, the senior secured
revolving credit facility restricts the payment of dividends on Era’s common stock for one year, until December 22, 2012 and, under certain
conditions thereafter, may restrict the ability of Era to distribute dividends on its common stock. Generally, dividends may be declared and paid
quarterly provided Era is in compliance with the various covenants of the senior secured revolving credit facility, as defined, and the dividend
amount does not exceed 20% of the net income of Era for the previous four consecutive quarters. As of December 31, 2011, Era had
consolidated net assets of $415.0 million, $252.0 million outstanding under the senior secured revolving credit facility at an annual rate of
3.23%, had no issued letters of credit, and had remaining availability of $98.0 million.
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Other . The Company has various other obligations including ship, helicopter, equipment and facility mortgages, working capital lines and
short term financing for certain Commodity Trading and Logistics’ inventories. These obligations have maturities ranging from several days
through May 2021 and, as of December 31, 2011, have interest rates ranging from 1.9% to 6.2%, and require periodic payments of interest and
principal. During the years ended December 31, 2011, 2010 and 2009, proceeds from the issuance of other debt was $23.2 million, $38.7 million
and $52.2 million, respectively, and repayments on other debt was $31.5 million, $4.9 million and $40.5 million, respectively.
As of December 31, 2011, the Company had other outstanding letters of credit, apart from its revolving credit facilities, totaling
$60.5 million with various expiration dates through 2014.
SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its
7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise,
depending on market conditions.
10.
CAPITAL LEASE OBLIGATIONS
The Company operates certain vessels and other equipment under leases that are classified as capital leases. The future minimum lease
payments under capital leases, together with the present value of the net minimum lease payments for the years ended December 31 are as
2012
2013
2014
2015
2016
Total minimum lease payments
Premium on capital leases
Less amounts representing interest
Present value of minimum lease payments (including current portion of $2,368)
$2,668
2,971
12
12
9
5,672
138
(374)
$5,436
As of December 31, 2011 and 2010, the Company had $10.4 million and $11.0 million, respectively, of equipment subject to capital lease
obligations. Amortization of assets under capital leases is included in depreciation and amortization in the accompanying consolidated
statements of income.
11.
COMMON STOCK
which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During
the years ended December 31, 2011, 2010 and 2009, the Company acquired for treasury 843,400, 1,811,700 and 606,576 shares of Common
Stock, respectively, for an aggregate purchase price of $71.3 million, $137.1 million and $45.9 million, respectively. As of December 31, 2011,
SEACOR had authorization to repurchase $41.8 million of Common Stock. On January 18, 2012, SEACOR’s Board of Directors increased the
repurchase authority to $150.0 million.
SEACOR’s Board of Directors declared a Special Cash Dividend of $15.00 per share of Common Stock payable to stockholders of record
on December 14, 2010. On or about December 21, 2010, the Company paid these dividends totaling $319.7 million on 21,312,130 shares of
Common Stock, including dividends of $5.0 million related to 334,099 outstanding restricted share awards. The Compensation Committee of
SEACOR’s Board of Directors elected, at its discretion, to pay the dividend on the restricted share awards in December 2010 rather than
depositing amounts in escrow pending the lapsing of restrictions.
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12.
SAVINGS AND MULTI-EMPLOYER PENSION PLANS
SEACOR Savings Plan. The Company provides a defined contribution plan (the “Savings Plan”) for its eligible U.S.-based employees.
The Company’s contribution to the Savings Plan is limited to 50% of an employee’s first 6% of wages invested in the Savings Plan and is
subject to annual review by the Board of Directors of SEACOR. The Company’s Savings Plan costs were $3.1 million, $3.0 million and
$3.1 million for the years ended December 31, 2011, 2010 and 2009, respectively.
SEACOR Deferred Compensation Plan. In 2005, the Company established a non-qualified deferred compensation plan (the “Deferred
Compensation Plan”) to provide a select group of highly compensated employees, as well as non-employee directors, the ability to defer receipt
of up to 75% of their cash base salary, up to 100% of their cash bonus and up to 100% of their vested restricted stock (deferred in the form of
Restricted Stock Units, as defined in the plan) for each fiscal year. Each participant’s compensation deferrals are credited to a bookkeeping
account and, subject to certain restrictions, each participant may elect to have their cash deferrals in such account indexed against one or more
investment options, solely for purposes of determining amounts payable under the Deferred Compensation Plan (the Company is not obligated to
actually invest any deferred amounts in the selected investment options).
Participants may receive a distribution of deferred amounts, plus any earnings thereon (or less any losses), on a date specified by the
participant or, if earlier, upon a separation from service or upon a change of control. All distributions to participants following a separation from
service shall be in the form of a lump sum, except if such separation qualifies as “retirement” under the terms of the plan, in which case it may
be paid in installments if previously elected by the participant. Distributions to “Key Employees” upon a separation from service (other than due
to death) will not commence until at least 6 months after the separation from service. Participants are always 100% vested in the amounts that
participants contribute to their Deferred Compensation Plan accounts. The Company, at its option, may contribute amounts to participants’
accounts, which may be subject to vesting requirements.
The obligations of the Company to pay deferred compensation under the Deferred Compensation Plan are general unsecured obligations of
the Company and rank equally with other unsecured indebtedness of the Company that is outstanding from time to time. As of December 31,
2011 and 2010, the Company had an obligation of $2.3 million and $2.7 million, respectively, related to the Deferred Compensation Plan and is
included in the accompanying consolidated balance sheets as deferred gains and other liabilities. The total amount of the Company’s obligation
under the Deferred Compensation Plan will vary depending upon the level of participation by participants and the amount of compensation that
participants elect to defer under the plan. The duration of the Deferred Compensation Plan is indefinite (subject to the Board of Directors’
discretion to amend or terminate the plan).
MNOPF and MNRPF. Certain subsidiaries of the Company are participating employers in industry-wide, multi-employer, defined benefit
pension funds in the United Kingdom, the United Kingdom Merchant Navy Officers Pension Fund (“MNOPF”) and the United Kingdom
Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation in the MNOPF relates to officers employed between 1978 and
2002 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors and its participation in the
MNRPF relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR
in 2001) and its predecessors. Both of these plans are in deficit positions and depending upon the results of future actuarial valuations, it is
possible that the plans could experience further funding deficits, requiring the Company to recognize payroll related operating expenses in the
periods invoices are received. The Company has one active employee participating in the MNOPF plan and none in the MNRPF plan. During the
years ended December 31, 2011, 2010 and 2009, contributions to the MNOPF were not material and did not exceed 5% of total contributions to
the plan in any year.
Under the direction of a court order, any deficit of the MNOPF is to be remedied through funding contributions from all participating
employers. Based on an actuarial valuation of the MNOPF in 2003, the
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Company was invoiced and expensed $4.4 million in 2005, representing the Company’s allocated share of a total funding deficit of
$412.0 million. Subsequent to this invoice, the pension fund trustees determined that $49.0 million of the $412.0 million deficit was deemed
uncollectible due to the non-existence or liquidation of certain participating employers and the Company was invoiced and expensed
$0.6 million in 2007 for its allocated share of the uncollectible deficit. Based on an actuarial valuation of the MNOPF in 2006, the Company was
invoiced and expensed $3.9 million in 2007, representing the Company’s allocated share of an additional funding deficit of $332.6 million.
Based on an actuarial valuation of the MNOPF in 2009, the Company was invoiced and expensed $7.8 million in 2010, representing the
Company’s allocated share of an additional funding deficit of $636.9 million.
Based on an actuarial valuation of the MNRPF in March 2008, the Company was advised that its share of a $281.0 million (£175.0
million) accumulated funding deficit was $1.0 million (£0.6 million). The accumulated funding deficit is being recovered by additional annual
contributions from current employers and is subject to adjustment following the results of future tri-annual actuarial valuations. During the year
ended December 31, 2011, $0.4 million, in the aggregate, of the Company’s funding deficit had been invoiced and expensed. Based on an
actuarial valuation of the MNRPF in March 2011, the Company was advised that the funding deficit had increased to $334.8 million (£217.0
million) of which the Company’s share is $0.3 million (£ 0.2 million). The recovery plans for the additional funding deficit are still being
considered.
AMOPP and SPP. Certain subsidiaries of the Company are participating employers in industry-wide, multi-employer defined benefit
pension plans in the United States: the American Maritime Officers Pension Plan (EIN: 13-1936709) (“the AMOPP”) and the Seafarers Pension
Plan (EIN: 13-6100329) (the “SPP”). The Company’s participation in these plans relates to certain employees of the Company’s Marine
Transportation Services and Harbor & Offshore Towing Services business segments. In accordance with collective bargaining agreements
between the Company and the American Maritime Officers (“AMO”), which expire on December 31, 2012 for Marine Transportation Services
and August 31, 2013 for Harbor & Offshore Towing Services and between the Company and the Seafarers International Union (“SIU”), which
expired on December 31, 2011 for Marine Transportation Services and expires on August 31, 2012 for Harbor & Offshore Towing Services, the
Company makes periodic contributions to the AMOPP and SPP. With respect to the collective bargaining agreements between Marine
Transportation Services and SIU, the Company continues to operate under the expired agreement while negotiations are ongoing. The
contributions to the plans are expensed as incurred and are included in operating expenses in the accompanying consolidated statements of
income. During the years ended December 31, 2011, 2010 and 2009, the Company made contributions of $0.9 million, $1.1 million and $1.1
million, respectively, to the AMOPP and $0.6 million, $1.3 million and $1.5 million, respectively to the SPP. During 2011, 2010 and 2009 none
of the Company’s contributions to the AMOPP or the SPP exceeded 5% of total contributions to the plans and the Company did not pay any
material surcharges. As of December 31, 2011, there is no required minimum future contribution to the AMOPP or the SPP. The Company’s
obligations for future contributions are based upon the number of employee’s subject to the collective bargaining agreements, their rates of pay
and the number of days worked.
Under federal pension law, the AMOPP was deemed in critical status for the 2009 and 2010 plan years, the latest periods for which a
report is available, as the funded percentage of the AMOPP was less than 65% of the pension liability. The AMOPP was frozen in January 2010
and a ten year rehabilitation plan was adopted by the AMOPP trustees in February 2010 whereby benefit changes and increased contributions by
participating employers are expected to improve the funded status of the AMOPP. Based on an actuarial valuation performed as of
September 30, 2010, the Company was advised that if it chose to withdraw from the AMOPP its withdrawal liability would have been $29.5
million. That liability may change in future years based on various factors, primarily employee census. As of December 31, 2011, the Company
has no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial
valuations and the ten year rehabilitation plan, it is possible that the AMOPP will experience further funding deficits, requiring the Company to
recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.
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The SPP was neither in endangered or critical status for the 2009 and 2010 plan years, the latest period for which a report is available, as
the funded percentage of the SPP was in excess of 100%.
Other Plans. Certain employees participate in other defined contribution plans in the United States and various international regions
including the United Kingdom and Singapore. During the years ended December 31, 2011, 2010 and 2009, the Company incurred costs of $0.3
million, $0.3 million and $0.4 million, respectively, in the aggregate related to these plans, primarily from employer matching contributions.
13.
SHARE BASED COMPENSATION
Share Incentive Plans. SEACOR’s stockholders approved the 2007 Share Incentive Plan to provide for the grant of options to purchase
shares of Common Stock, stock appreciation rights, restricted stock, stock awards, performance awards and restricted stock units to nonemployee directors, key officers and employees of the Company. The 2007 Share Incentive Plan superseded the 1992 Non-Qualified Stock
Option Plan, the 1996 Share Incentive Plan, the 2003 Non-Employee Director Share Incentive Plan and the 2003 Share Incentive Plan
(collectively, the “Share Incentive Plans”). The Compensation Committee of the Board of Directors administers the Share Incentive Plans. A
total of 4,650,000 shares of Common Stock have been authorized for grant under the Share Incentive Plans. All shares issued pursuant to such
grants are newly issued shares of Common Stock. The exercise price per share of options granted cannot be less than 100% of the fair market
value of Common Stock at the date of grant under the Share Incentive Plans. Grants to date have been limited to stock awards, restricted stock,
restricted stock units and options to purchase shares of Common Stock.
Restricted stock and restricted stock units typically vest from one to five years after grant and options to purchase shares of Common Stock
typically vest and become exercisable from one to five years after date of grant. Options to purchase shares of Common Stock granted under the
Share Incentive Plans expire no later than the tenth anniversary of the date of grant. In the event of a participant’s death, retirement, termination
by the Company without cause or a change in control of the Company, as defined in the Share Incentive Plans, restricted stock and restricted
stock units vest immediately and options to purchase shares of Common Stock vest and become immediately exercisable.
Employee Stock Purchase Plans. SEACOR’s stockholders approved the 2009 Employee Stock Purchase Plan and the 2000 Employee
Stock Purchase Plan (collectively, the “Employee Stock Purchase Plans”) to permit the Company to offer Common Stock for purchase by
eligible employees at a price equal to 85% of the lesser of (i) the fair market value of Common Stock on the first day of the offering period or
(ii) the fair market value of Common Stock on the last day of the offering period. Common Stock is made available for purchase under the
Employee Stock Purchase Plans for six-month offering periods. The Employee Stock Purchase Plans are intended to comply with Section 423 of
the Internal Revenue Code of 1986, as amended (the “Code”), but is not intended to be subject to Section 401(a) of the Code or the Employee
Retirement Income Security Act of 1974. The Board of Directors of SEACOR may amend or terminate the Employee Stock Purchase Plans at
any time; however, no increase in the number of shares of Common Stock reserved for issuance under the Employee Stock Purchase Plans may
be made without stockholder approval. A total of 600,000 shares of Common Stock have been approved for purchase under the Employee Stock
Purchase Plans with all shares issued from those held in treasury. Each of the Employee Stock Purchase Plans has a term of ten years.
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Share Award Transactions. The following transactions have occurred in connection with the Company’s share based compensation plans
during the years ended December 31:
2011
Restricted stock awards granted
Restricted stock awards forfeited
Director stock awards granted
Restricted Stock Unit Activities:
Outstanding as of the beginning of year
Granted
Converted to shares
Outstanding as of the end of year
Shares released from Deferred Compensation Plan
Stock Option Activities:
Outstanding as of the beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding as of the end of year
Employee Stock Purchase Plan shares issued
Shares available for issuance under Share Incentive and Employee Stock Purchase Plans as of
the end of year
2010
2009
183,500
(4,100)
4,000
230,662
(2,238)
4,250
141,750
(7,550)
5,000
531
650
(51)
1,130
(63)
1,070
63
(602)
531
(2,206)
1,445
600
(975)
1,070
(1,207)
1,130,356
290,960
(146,169)
(1,920)
(1,035)
1,272,192
47,376
1,220,601
244,450
(324,270)
(6,100)
(4,325)
1,130,356
39,231
1,129,685
223,850
(93,394)
(23,070)
(16,470)
1,220,601
49,077
538,287
1,057,781
1,624,172
During the years ended December 31, 2011, 2010 and 2009, the Company recognized $21.9 million, $19.6 million and $13.4 million,
respectively, of compensation expense related to stock awards, stock options, employee stock purchase plan purchases, restricted stock and
restricted stock units (collectively referred to as “share awards”). As of December 31, 2011, the Company had approximately $42.2 million in
total unrecognized compensation costs of which $14.7 million and $11.4 million are expected to be recognized in 2012 and 2013, respectively,
with the remaining balance recognized through 2016.
The weighted average values of grants under the Company’s Share Incentive Plans were $56.57, $53.05 and $36.57 for the years ended
December 31, 2011, 2010 and 2009, respectively. The fair value of each option granted during the years ended December 31, 2011, 2010 and
2009 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: (a) no dividend yield,
(b) weighted average expected volatility of 30.7%, 29.3% and 31.5%, respectively, (c) weighted average discount rates of 1.65%, 1.86% and
2.04%, respectively, and (d) expected lives of 5.73 years, 5.90 years and 5.66 years, respectively.
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During the year ended December 31, 2011, the number of shares and the weighted average grant price of restricted stock and restricted
stock unit transactions were as follows:
Restricted Stock
Weighted
Number of
Average
Shares
Grant Price
Nonvested as of December 31, 2010
Granted
Vested
Forfeited
Nonvested as of December 31, 2011
332,481
183,500
(18,975)
(4,100)
492,906
$
$
$
$
$
78.09
98.26
82.16
76.89
85.45
Restricted Stock Units
Weighted
Number of
Average
Shares
Grant Price
531
650
(51)
—
1,130
$
$
$
$
$
68.62
98.37
79.53
—
85.08
During the years ended December 31, 2011, 2010 and 2009, the total grant date fair value of restricted stock and restricted stock units that
vested was $1.6 million, $18.9 million and $8.0 million, respectively. During the year ended December 31, 2010, the Company accelerated the
vesting date for all restricted stock and restricted stock units that were scheduled to vest in 2011 into 2010 resulting in additional compensation
expense of $3.1 million.
During the year ended December 31, 2011, the number of shares, the weighted average grant date fair value and the weighted average
exercise price on stock option transactions were as follows:
Outstanding, as of December 31, 2010
Granted
Vested
Exercised
Forfeited
Expired
Outstanding, as of December 31, 2011
Vested/Exercisable Options
Total Options
Nonvested Options
Weighted
Average
Number of
Grant Date
Shares
Fair Value
Number of
Shares
Weighted
Average
Exercise Price
Number of
Shares
Weighted
Average
Exercise Price
573,400
290,960
(215,490)
—
(1,920)
—
646,950
556,956
—
215,490
(146,169)
—
(1,035)
625,242
$
$
$
$
$
$
$
1,130,356
290,960
—
(146,169)
(1,920)
(1,035)
1,272,192
$
$
$
$
$
$
$
$
$
$
$
$
$
$
25.03
29.73
24.80
—
24.20
—
27.23
53.29
—
66.99
48.79
—
96.18
59.04
59.77
92.43
—
48.79
65.02
96.18
68.49
During the years ended December 31, 2011, 2010 and 2009, the aggregate intrinsic value of exercised stock options was $6.8 million,
$13.6 million and $3.8 million, respectively. As of December 31, 2011, the weighted average remaining contractual term for total outstanding
stock options and vested/exercisable stock options was 6.25 and 3.90 years, respectively. As of December 31, 2011, the aggregate intrinsic value
of all options outstanding and all vested/exercisable options outstanding was $27.8 million and $18.8 million, respectively.
As a result of the Special Cash Dividend (see Note 11) paid during the year ended December 31, 2010, the Company reduced the exercise
prices for all outstanding stock options as of the Special Cash Dividend record date by the dividend amount of $15.00. As a result of the
adjustment, both the aggregate intrinsic value and the ratio of the exercise price to the market price were approximately equal immediately prior
to and after the Special Cash Dividend record date. As the adjustment was made in accordance with the anti-dilution provisions of the Share
Incentive Plans, no compensation expense was recognized for the adjustment.
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14.
RELATED PARTY TRANSACTIONS
The Company manages barge pools as part of its Inland River Services segment. Pursuant to the pooling agreements, operating revenues
and expenses of participating barges are combined and the net results are allocated on a pro-rata basis based on the number of barge days
contributed by each participant. Mr. Charles Fabrikant, the Executive Chairman of SEACOR, companies controlled by Mr. Fabrikant, and trusts
for the benefit of Mr. Fabrikant’s two children, own barges that participate in the barge pools managed by the Company. Mr. Fabrikant and his
affiliates were participants in the barge pools prior to the acquisition of SCF Marine Inc. by SEACOR in 2000. In the years ended December 31,
2011, 2010 and 2009, Mr. Fabrikant and his affiliates earned $1.2 million, $1.1 million and $1.0 million, respectively, of net barge pool results
(after payment of $0.1 million, $0.1 million and $0.1 million, respectively, in management fees to the Company). As of December 31, 2011 and
2010, the Company owed Mr. Fabrikant and his affiliates $0.4 million and $0.5 million, respectively, for undistributed net barge pool results.
Mr. Fabrikant and his affiliates participate in the barge pools on the same terms and conditions as other pool participants who are unrelated to the
Company.
Mr. Fabrikant is also a director of Diamond Offshore Drilling, Inc. (“Diamond”), which is also a customer of the Company. The total
amount earned from business conducted with Diamond did not exceed $5.0 million in any of the years ended December 31, 2011, 2010 or 2009.
15.
COMMITMENTS AND CONTINGENCIES
The Company’s unfunded capital commitments as of December 31, 2011 consisted primarily of offshore support vessels, helicopters,
inland river tank barges, harbor tugs, an interest in a river grain terminal, an interest in a dry-bulk articulated tug-barge and other property and
equipment. These commitments totaled $312.5 million, of which $199.3 million is payable during 2012 with the balance payable through 2014.
Of the total unfunded capital commitments, $43.6 million may be terminated without further liability other than the payment of liquidated
damages of $1.4 million. Subsequent to December 31, 2011, the Company committed to purchase additional equipment for $50.3 million.
On August 19, 2011, the Company granted two fixed price purchase options to an unrelated third party to acquire up to 25% of the
outstanding common stock of O’Brien’s Response Management Inc., a component of the Environmental Services business segment. The first
option to acquire a 12.5% interest may be exercised beginning August 19, 2012 through August 19, 2014. If the first option is exercised, the
second option to acquire an additional 12.5% may be exercised beginning August 19, 2013 through August 19, 2015.
new allegations in the Amended Complaint. Following the completion of such limited discovery, on February 11, 2011, the Defendants filed a
motion for summary judgment to dismiss the Amended Complaint with prejudice. On June 23, 2011, the Court granted summary judgment for
the Defendants. On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit. On August 9, 2011,
Defendants moved for certain excessive costs, expenses, and attorneys’ fees under 28 U.S.C. § 1927. That
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motion is fully briefed and a decision is pending. On October 11, 2011, the plaintiffs filed their opening appeal brief with the U.S. Court of
Appeals for the Third Circuit. That motion is fully briefed and oral argument is calendared for March 20, 2012. The Company is unable to
estimate the potential exposure, if any, resulting from these claims but believes they are without merit and will continue to vigorously defend the
action.
aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed
which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in
connection with the provision of remediation, containment and response services by O’Brien’s Response Management Inc. (“O’Brien’s), a
subsidiary of SEACOR. The action now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical
monitoring program” for all individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response
Program” who allegedly experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal.
Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to
indemnify and defend O’Brien’s in connection with the Wunstell Action and claims asserted in the MDL.
and denied in part the motion to dismiss that O’Brien’s and NRC had filed (an amended decision was issued on October 4, 2011 that corrected
several grammatical errors and non-substantive oversights in the original order). Although the Court refused to dismiss the referenced master
complaint in its entirety at that time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that
O’Brien’s and NRC advanced and has directed
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O’Brien’s and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the arguments. A
schedule for such limited discovery and future motion practice has been established by the Court and currently contemplates that O’Brien’s and
NRC will file motions re-asserting their derivative immunity and implied preemption arguments on May 18, 2012. The Court did, however,
dismiss all state-law claims and certain other claims that had been asserted in the referenced master complaint, and dismissed the claims of all
plaintiffs that have failed to allege a legally-sufficient injury. Finally, the Court stated that the plaintiffs could file an amended master complaint
and the plaintiffs have indicated that they intend to do so. In addition to the indemnity provided to O’Brien’s, pursuant to contractual agreements
with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend O’Brien’s and NRC
in connection with these claims in the MDL.
change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a
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During the year ended December 31, 2010, the Company received notice from the IRS of $12.6 million in proposed penalties regarding
Marine Transportation Services’ informational excise tax filings for prior years. In February 2012, the Company settled the matter with the IRS
with no material effect on the Company’s consolidated financial position or its results of operations.
During the year ended December 31, 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal
Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required
importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed
assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial
position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels whose owner would be responsible to
reimburse any potential payment.
As of December 31, 2011, the Company leases 24 offshore support vessels, eleven helicopters, two barges, two tankers and certain
facilities and other equipment. These leasing agreements have been classified as operating leases for financial reporting purposes and related
rental fees are charged to expense over the lease terms. The leases generally contain purchase and lease renewal options or rights of first refusal
with respect to the sale or lease of the equipment. The lease terms of the tankers, which are subject to subleases, have durations of 130 and 146
months. The lease terms of the other equipment range in duration from one to seven years. Certain of the equipment leases are the result of saleleaseback transactions with finance companies (see Note 4) and certain of the gains arising from such sale-leaseback transactions have been
deferred in the accompanying consolidated balance sheets and are being amortized as reductions in rental expense over the lease terms (see Note
1).
Total rental expense for the Company’s operating leases in 2011, 2010 and 2009 was $57.9 million, $56.0 million and $65.5 million,
respectively. Future minimum payments in the years ended December 31 under operating leases that have a remaining term in excess of one year
as of December 31, 2011 were as follows (in thousands):
2012
2013
2014
2015
2016
(1)
16.
Total Minimum
Payments
Non-cancellable
Subleases (1)
Net Minimum
Payments
$
$
$
44,564
41,806
36,582
32,533
26,152
127,456
(17,392)
(17,345)
(17,345)
(17,345)
(17,392)
(110,817)
27,172
24,461
19,237
15,188
8,760
16,639
The total minimum offsetting payments to be received under existing long-term bareboat charter-out arrangements (see Note 4).
MAJOR CUSTOMERS AND SEGMENT INFORMATION
Accounting standards require public business enterprises to report information about each of their operating business segments that exceed
certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as a component of
an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. The Company has identified the following reporting segments:
Offshore Marine Services. Offshore Marine Services operates a diversified fleet of support vessels primarily servicing offshore oil and gas
exploration, development and production facilities worldwide. Vessels in this service are employed to deliver cargo and personnel to offshore
installations, handle anchors for drilling rigs and other marine equipment, support offshore construction and maintenance work, provide standby
safety support and emergency response services. From time to time, Offshore Marine Services supports projects such as
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well stimulation, seismic data gathering and offshore accommodation. On December 22, 2011, Offshore Marine Services acquired a controlling
interest in a business that owns and operates vessels primarily being used to move personnel and supplies to offshore wind turbines. Offshore
Marine Services also offers logistics services in support of offshore oil and gas exploration, development and production operations, including
shorebased, marine transport and other supply chain management services. Offshore Marine Services contributed 18%, 19% and 33% of
consolidated operating revenues in 2011, 2010 and 2009, respectively.
Aviation Services. Aviation Services is one of the largest helicopter operators in the world and the longest serving helicopter transport
operator in the United States, which is its primary area of operation. Aviation Services is primarily engaged in transportation services to the
offshore oil and gas exploration, development and production industry. Its major customers are major integrated and independent oil and gas
companies and U.S. government agencies. In addition to serving the oil and gas industry, Aviation Services provides air medical services,
firefighting support, flightseeing tours in Alaska, and emergency search and rescue services. Aviation Services operates a fixed base operation
(“FBO”) at Ted Stevens Anchorage International Airport and a Federal Aviation Administration (“FAA”) approved maintenance repair station in
Lake Charles, Louisiana. Aviation Services has an interest in a sales and manufacturing organization based in Canada that engineers,
manufactures and distributes after-market helicopter parts and accessories, and has an interest in a training center based in Lake Charles,
Louisiana, that provides instruction, flight simulator and other training service. Aviation Services contributed 12%, 9% and 14% of consolidated
operating revenues in 2011, 2010 and 2009 respectively.
Inland River Services. Inland River Services owns, operates, invests in and markets inland river transportation equipment primarily
transporting agricultural and industrial commodities, and chemical and petrochemical products on the U.S. Inland River Waterways, primarily
the Mississippi River, Illinois River, Tennessee River, Ohio River and their tributaries, and the Gulf Intracoastal Waterways. Inland River
Services also owns towboats used for moving barges, fleeting operations and deck barges. Inland River Services also has interests in operations
on the Magdalena River in Colombia and on the Parana-Paraguay Rivers in Argentina, and a transshipment terminal at the Port of Ibicuy,
Argentina. In addition to its primary barge business, Inland River Services also has interests in high-speed multi-modal terminal facilities and
provides a broad range of services including machine shop, gear and engine repairs, repair of barges and towboats at strategic locations on the
U.S. Inland River Waterways. Inland River Services contributed 9%, 6% and 9% of consolidated operating revenues in 2011, 2010 and 2009,
respectively.
Marine Transportation Services. Marine Transportation Services’ fleet consists of seven U.S.-flag product tankers, of which five are
owned and two are leased, providing marine transportation services for petroleum products and chemicals moving in the U.S. domestic
coastwise trade, and eight Roll-on/Roll-off (“RORO”) vessels engaged in the shipping trade between the United States, the Bahamas and the
Caribbean. Marine Transportation Services contributed 4%, 3% and 5% of consolidated operating revenues in 2011, 2010 and 2009,
respectively.
Environmental Services. Environmental Services primarily provides emergency preparedness and response services to oil, chemical,
industrial and marine transportation clients, and government agencies in the United States and abroad. In the United States, these services are
generally rendered to those clients who store, transport, produce or handle petroleum and certain non-petroleum oils that are subject to the
provisions of OPA 90 and various other federal, state and municipal regulations. Internationally, these services may be required by legislation
and regulation of countries, international maritime conventions and environmental covenants placed on clients by their lending institutions. To a
lesser extent, Environmental Services provides emergency preparedness and response services to governmental agencies arising from natural
disasters and homeland security issues such as debris removal monitoring, public assistance projects, bio-terrorism, pandemic influenza and port
security. Environmental Services also provides other services to oil, chemical, industrial and government clients including crisis
communications, emergency preparedness and response software, hazardous waste management, stand-by fire-fighting, industrial and marine
cleaning, salvage support, petroleum storage tank cleaning and removal, and site remediation services. Environmental Services contributed 10%,
33% and 8% of consolidated operating revenues in 2011, 2010 and 2009, respectively.
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Commodity Trading and Logistics. Commodity Trading and Logistics operates an integrated business involved in the purchase, storage,
transportation and sale of agricultural and energy commodities. The principal commodities currently involved are sugar, ethanol, clean
blendstocks and crude oil. Commodity Trading and Logistics contributed 44%, 28% and 28% of consolidated operating revenues in 2011, 2010
and 2009, respectively.
Other Activities.
Harbor and Offshore Towing Services. As of December 31, 2011, Harbor and Offshore Towing Services operated a total of five ocean
liquid tank barges and 28 vessels, of which 13 were conventional tugs, five were Azimuth Stern Drive tugs, three were Forward Azimuth Drive
tugs, two were tractor tugs and five were Ship Docking Modules (“SDM™”). SDMs™ are innovative vessels designed and patented by the
Company that are maneuverable, efficient and flexible and require fewer crew members than conventional harbor tugs.
Other Joint Ventures, Leasing and Other Activities. The Company has investments in 50% or less owned companies which include a
company that designs and manufactures water treatment systems for sale or lease, and three industrial aviation services businesses in Asia. The
Company also engages in lending and leasing activities.
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The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
Offshore
For the year ended December 31, 2011
Operating Revenues:
External customers
Intersegment
Costs and Expenses:
Operating
Gains (Losses) on Asset Dispositions and
Impairments, Net
Derivative losses, net
Other, net
Equity in Earnings (Losses) of 50% or Less
Owned Companies
Aviation
Marine
Transportation
Environmental
Commodity
Trading and
Services
$’000
Services
$’000
Logistics
$’000
Corporate
and
Eliminations
Marine
Services
$’000
Services
Inland
River
Services
$’000
$’000
376,607
181
376,788
258,130
18
258,148
177,212
10,445
187,657
92,786
350
93,136
211,606
30
211,636
955,688
—
955,688
69,913
15
69,928
—
(11,039)
(11,039)
2,141,942
—
2,141,942
269,203
47,201
48,477
364,881
162,707
31,893
42,612
237,212
119,499
11,339
23,494
154,332
53,095
8,864
22,079
84,038
136,013
33,014
9,473
178,500
940,506
8,404
57
948,967
37,691
11,942
8,774
58,407
(10,527)
34,890
1,858
26,221
1,708,187
187,547
156,824
2,052,558
14,661
26,568
15,172
36,108
2,964
36,289
1,125
10,223
—
6,721
226
11,747
(144)
(37,404)
33,950
123,334
—
(3,102)
278
(1,326)
516
9
(29,075)
3,395
(521)
(36,135)
816
860
9,189
32,933
82
35,389
—
—
4
—
(11)
274
4,136
40,429
(74)
10,412
(54)
33,082
—
12
2
(53)
33,043
Other
$’000
(5,734)
104
(167)
—
(98)
981
(1,815)
(891)
(1,524)
11,106
Total
$’000
$’000
—
Other Income (Expense) not included in
Segment Profit
Less Equity Earnings included in Segment
Profit
Income Before Taxes and Equity Earnings
As of December 31, 2011
Investments, at Equity, and Advances to 50% or
Goodwill
Intangible Assets
Other current and long-term assets, excluding
cash and near cash assets (1)
Segment Assets
(35,481)
(9,941)
53,394
88,248
158,929
44,693
12,516
8,397
130
16,356
3,043
332,312
654,819
709,451
383,292
226,142
37,045
229
154,945
20,149
2,186,072
68,330
13,367
5,971
50,263
352
—
50,183
4,345
7,324
12,284
550
1,528
2,279
45,151
6,586
11,790
—
—
56,709
1,302
417
—
—
—
251,838
65,067
21,826
131,921
874,408
91,648
851,714
74,987
520,131
4,675
245,179
63,221
154,282
116,100
128,119
73,520
286,893
31,505
587,577
Cash and near cash assets (1)
Total Assets
(1)
9,941
815,754
3,928,134
Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.
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Offshore
Marine
Services
$’000
Operating Revenues:
External customers
Intersegment
Costs and Expenses:
Operating
Impairments, Net
Other, net
Owned Companies
Aviation
Services
Inland
River
Services
$’000
$’000
Marine
Transportation
Environmental
Commodity
Trading and
Services
$’000
Services
$’000
Logistics
$’000
Corporate
and
Eliminations
Other
$’000
Total
$’000
$’000
499,885
15,971
515,856
235,395
(29)
235,366
149,273
12,424
161,697
76,163
—
76,163
874,361
32
874,393
741,896
—
741,896
72,395
440
72,835
—
(28,838)
(28,838)
2,649,368
—
2,649,368
309,587
50,795
51,760
412,142
147,233
25,798
43,351
216,382
97,178
10,691
20,721
128,590
39,275
5,002
28,645
72,922
593,288
31,555
8,396
633,239
729,135
11,435
61
740,631
43,365
11,472
8,803
63,640
(28,834)
45,770
1,753
18,689
1,930,227
192,518
163,490
2,286,235
29,474
133,188
764
19,748
31,928
65,035
(18,688)
(15,447)
510
241,664
—
1,265
1,203
10,398
47
(47,480)
45,238
408,371
—
1,622
1
(118)
(1,511)
50
—
—
2,237
9,306
144,117
(137)
18,032
3,708
70,980
—
22
—
—
(15,425)
—
(105)
1
683
242,243
(4,580)
(531)
787
(604)
(3,663)
—
(16)
44
223
10,649
10,903
(5,608)
597
—
Less Equity Earnings included in Segment Profit
Goodwill
Intangible Assets
Segment Assets
13,179
(38,687)
(13,179)
373,479
80,172
130,770
23,610
6,254
7,341
—
12,656
(10,177)
613,506
612,078
317,628
218,615
34,618
156
153,014
19,107
1,968,722
45,384
13,367
8,013
27,912
353
—
40,553
1,743
1,094
—
—
1,936
2,160
45,014
9,596
14,467
—
—
51,911
1,302
530
—
—
—
182,387
61,779
21,169
138,456
818,726
72,570
712,913
61,499
422,517
4,034
224,585
230,164
321,552
63,680
78,303
44,267
251,024
57,689
672,359
Total Assets
(1)
6,205
(6,127)
3,717
250,626
853,973
3,760,389
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Offshore
Operating Revenues:
External customers
Intersegment
Costs and Expenses:
Operating
Impairments, Net
Other, net
Owned Companies
Segment Profit
Marine
Services
$’000
Services
Inland
River
Services
$’000
$’000
557,269
5,022
562,291
235,595
72
235,667
143,503
11,595
155,098
92,866
—
92,866
145,648
119
145,767
472,575
—
472,575
63,882
472
64,354
—
(17,280)
(17,280)
1,711,338
—
1,711,338
309,635
47,031
54,869
411,535
147,955
21,396
37,358
206,709
89,444
8,764
19,357
117,565
50,568
4,122
32,006
86,696
103,761
25,452
7,150
136,363
460,713
12,644
29
473,386
40,572
10,422
8,172
59,166
(17,552)
32,167
1,151
15,766
1,185,096
161,998
160,092
1,507,186
22,490
173,246
316
29,274
4,706
42,239
—
6,170
363
5,551
(3)
(33,049)
27,675
231,827
266
1,439
—
—
—
—
—
136
(54)
6,842
3,555
91
10,961
8,087
244
(811)
4,822
—
12,581
(175)
2,451
182
9,867
185,571
Aviation
(487)
30,492
Marine
Transportation
Environmental
Commodity
Trading and
Services
$’000
Services
$’000
Logistics
$’000
—
(1)
—
3,882
46,121
—
6,169
(197)
9,207
—
9
—
225
9,441
—
(811)
4,028
498
25
(95)
3,645
Corporate
and
Eliminations
Other
$’000
Total
$’000
$’000
Segment Profit
Less Equity Earnings included in Segment
Profit
Goodwill
Intangible Assets
Segment Assets
(36,105)
(12,581)
215,014
39,135
90,762
14,711
124
7,336
120
23,076
4,760
180,024
727,256
523,195
267,971
364,745
35,728
228
155,599
4,026
2,078,748
48,460
13,367
10,226
26,399
353
—
84,581
1,743
1,465
—
—
2,332
2,109
37,806
8,891
14,567
—
—
10,698
1,302
640
—
—
—
186,814
54,571
23,554
171,521
970,830
69,679
619,626
56,914
412,674
8,658
375,735
41,943
126,477
86,676
101,471
27,061
195,300
59,673
522,125
Total Assets
(1)
857,807
3,723,619
164
Table of Contents
In 2010, one customer (BP p.l.c.) was responsible for $871.4 million, or 33%, of consolidated operating revenues. In 2011 and 2009, the
Company did not earn revenues that were greater than or equal to 10% of total revenues from a single customer. For the years ended
December 31, 2011, 2010 and 2009, approximately 30%, 16% and 30%, respectively, of the Company’s operating revenues were derived from
its foreign operations. The Company’s foreign revenues are primarily derived from its Offshore Marine Services and Aviation Services fleet.
These assets are highly mobile and regularly and routinely move between countries within a geographical region of the world. In addition, these
assets may be redeployed among the geographical regions as changes in market conditions dictate. Because of this asset mobility, revenues and
long-lived assets, primarily property and equipment, in any one country are not considered material. The following represents the Company’s
revenues attributed by geographical region in which services are provided to customers for the years ended December 31 (in thousands):
Operating Revenues:
United States
Asia
Middle East
Other
2011
2010
2009
$1,505,704
77,306
87,680
18,462
57,937
352,983
41,870
$2,141,942
$2,229,353
123,073
76,009
34,809
58,904
103,136
24,084
$2,649,368
$1,190,218
191,360
73,848
35,737
81,970
115,703
22,502
$1,711,338
The Company’s long-lived assets are primarily its property and equipment that are employed in various geographical regions of the world.
The following represents the Company’s property and equipment based upon the assets’ physical location as of December 31 (in thousands):
Property and Equipment:
United States
Asia
Middle East
Other
165
2011
2010
2009
$1,441,862
90,483
111,292
61,830
76,062
315,375
89,168
$2,186,072
$1,340,611
129,198
76,154
44,496
65,314
267,623
45,326
$1,968,722
$1,386,745
128,745
69,893
49,550
83,107
306,265
54,443
$2,078,748
Table of Contents
17.
SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS
Supplemental information for the years ended December 31 was as follows (in thousands):
Income taxes paid
Income taxes refunded
Interest paid, excluding capitalized interest
Schedule of Non-Cash Investing and Financing Activities:
Company financed purchase of noncontrolling interests
Company financed sale of vessels
Equipment received on extinguishment of note receivable
Contribution of assets to business ventures
Contribution of assets from noncontrolling interests
Settlement of Convertible Debentures, including purchase of conversion option – Common
Stock
18.
2011
2010
2009
$ 8,398
2,499
39,559
$151,501
25,901
43,445
$ 47,535
7,534
52,155
—
11,889
—
12,361
124
—
7,088
6,211
—
—
7,000
7,603
—
14,685
—
—
—
217,174
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected financial information for interim quarterly periods is presented below (in thousands, except share data). Earnings per common
share of SEACOR Holdings Inc. are computed independently for each of the quarters presented and the sum of the quarterly earnings per share
may not necessarily equal the total for the year.
Dec. 31,
Three Months Ended
Sept. 30,
June 30,
March 31,
2011
Operating Revenues
Operating Income
Net Income
2010
Operating Revenues
Operating Income
Net Income
Special Cash Dividend Declared and Paid Per Common Share of SEACOR Holdings Inc.
166
$561,808
41,791
17,252
17,040
$
0.81
$
0.80
$571,424
28,438
4,062
3,815
$
0.18
$
0.18
$536,446
31,050
9,367
9,031
$
0.43
$
0.42
$472,264
22,055
11,469
11,170
$
0.53
$
0.52
$580,384
39,643
27,200
27,103
$
1.30
$
1.27
$ 15.00
$979,833
228,571
150,272
149,938
$
7.21
$
7.14
$
—
$694,576
126,516
64,647
64,082
$
2.95
$
2.93
$
—
$394,575
13,641
3,865
3,601
$
0.16
$
0.16
$
—
Table of Contents
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2011, 2010 and 2009
(in thousands)
Description
Allowance for doubtful accounts (deducted from trade and notes
receivable)
receivable)
receivable)
(1)
Balance
Beginning
of Year
Charges
(Credits)
to Cost and
Expenses
Deductions (1)
Balance
End
of Year
$ 6,042
$
$
(2,204)
$3,652
$ 5,909
$ 1,330
$
(1,197)
$6,042
$ 6,618
$ 1,717
$
(2,426)
$5,909
(186)
Trade and notes receivable amounts deemed uncollectible that were removed from accounts receivable and allowance for doubtful accounts.
167
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
3.1*
Restated Certificate of Incorporation of SEACOR Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 (a) of the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997 and filed with the Commission on
May 15, 1997).
3.2*
Certificate of Amendment to the Restated Certificate of Incorporation of SEACOR Holdings, Inc. (incorporated herein by
reference to Exhibit 3.1(b) of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997 and
filed with the Commission on May 15, 1997).
3.3*
Certificate of Amendment to the Restated Certificate of Incorporation of SEACOR Holdings Inc. (incorporated herein by
reference to Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No. 333-126613) filed with the Commission
on July 15, 2005).
3.4*
Fourth Amended and Restated Bylaws of SEACOR Holdings Inc. (incorporated by reference to Exhibit 3.1 of the Company’s
Current Report on Form 8-K filed with the Commission on September 20, 2010).
4.1*
4.2*
4.3*
First Supplemental Indenture, dated as of September 27, 2002, to Indenture, dated as of January 10, 2001, between SEACOR
SMIT Inc. and U.S. Bank National Association (incorporated herein by reference to Exhibit 4.1 of the Company’s Current
Report on Form 8-K filed with Commission on October 1, 2002).
4.4*
Indenture, dated as of August 5, 2003, among Seabulk International, Inc., the Guarantors named therein, and Wachovia Bank,
National Association, as Trustee (including forms of notes) (incorporated herein by reference to Exhibit 4.7 of Seabulk
International, Inc.’s Registration Statement on Form S-4 (No. 333-110138) filed with the Commission on October 31, 2003).
4.5*
Supplemental Indenture, dated September 24, 2009, between SEACOR Holdings Inc. and U.S. Bank National Association, as
trustee (including therein Form of Global Note 7.375% Senior Notes Due 2019) (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed with Commission on September 24, 2009).
10.1*+
Statement on DEF 14-A filed with the Commission on March 18, 1996).
10.2*+
SEACOR SMIT Inc. 2000 Stock Option Plan for Non-Employee Directors (incorporated herein by reference to Exhibit 10.1
of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2000 and filed with the Commission on
August 14, 2000).
10.3*
Form of Management Agreement (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on
Form 8-K filed with the Commission on December 24, 1996).
10.4*
License Agreement, dated December 19, 1996, between SEACOR Holdings Inc., certain subsidiaries of SEACOR
Holdings Inc. and Smit Intenationale N.V. (incorporated herein by reference to Exhibit 10.6 of the Company’s Current Report
on Form 8-K filed with the Commission on December 24, 1996).
168
Table of Contents
Exhibit
Number
Description
10.5*+
Form of Type A Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.35 of the Company’s
10.6*+
Form of Type B Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.36 of the Company’s
10.7*+
Form of Option Agreement for Officers and Key Employees Pursuant to the SEACOR SMIT Inc. 1996 Share Incentive Plan
December 31, 1999 filed with the Commission on March 30, 2000).
10.8*+
SEACOR SMIT Inc. 2003 Non-Employee Director Share Incentive Plan (incorporated herein by reference to Exhibit 10.25 of
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Commission on
March 15, 2004).
10.9*+
SEACOR SMIT Inc. 2003 Share Incentive Plan (incorporated herein by reference to Exhibit 10.26 of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Commission on March 15, 2004).
10.10*+
Form of Option Agreement for Officers and Key Employees Pursuant to the SEACOR Holdings Inc. 2003 Share Incentive
Plan (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the
Commission on November 24, 2004).
10.11*+
Form of Restricted Stock Grant Agreement under the Company’s 2003 Share Incentive Plan (incorporated herein by reference
to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Commission on November 24, 2004).
10.12*
Form of Warrant Exchange Agreement (incorporated herein by reference to Exhibit 10.32 of the Company’s Registration
Statement (No. 333-124232) on Form S-4/A filed with the Commission on May 25, 2005).
10.13*+
SEACOR Nonqualified Deferred Compensation Plan, dated as of October 15, 2005 (incorporated herein by reference to
Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the Commission on October 28, 2005).
10.14*
Revolving Credit Facility Agreement, dated November 3, 2006, between SEACOR Holdings Inc. as Borrower, and DNB Nor,
ASA, as Agent (incorporated herein by reference to Exhibit 10.1 of SEACOR’s Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2006 filed with the Commission on November 7, 2006).
10.15*+
SEACOR SMIT Inc. 2000 Employee Stock Purchase Plan, as amended February 14, 2001 (incorporated herein by reference
to Exhibit 4.4 of the Company’s Registration Statement on Form S-8 (No. 333-56714) filed with the Commission on March 8,
2001).
10.16*+
10.17*
Amendment No. 1 to Revolving Credit Facility Agreement dated as of November 3, 2006 (incorporated herein by reference to
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Commission on July 10, 2007).
10.18*+
Form of Non-Employee Director Annual Share Incentive Grant Agreement (incorporated herein by reference to Exhibit 10.1
of the Company’s Current Report on Form 8-K filed with the Commission on May 8, 2008).
169
Table of Contents
Exhibit
Number
Description
10.19*+
Form of Stock Option Grant Agreement for Officers and Key Employees Pursuant to the SEACOR Holdings Inc. 2007 Share
Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the
Commission on May 8, 2008).
10.20*+
Form of Restricted Stock Grant Agreement (incorporated herein by reference to Exhibit 10.3 of the Company’s Current
Report on Form 8-K filed with the Commission on May 8, 2008).
10.21*+
SEACOR Holdings Inc. 2009 Employee Stock Purchase Plan effective March 11, 2009 (incorporated herein by reference to
Appendix A of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 7, 2009).
10.22*+
SEACOR Holdings Inc. 2007 Share Incentive Plan (as amended through March 11, 2009) (incorporated herein by reference
to Appendix B of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 7, 2009).
10.23*+
SEACOR Holdings Inc. Management Incentive Plan (incorporated herein by reference to Appendix C of the Company’s
Proxy Statement on DEF 14-A filed with the Commission on April 7, 2009).
10.24*+
Form of Restricted Stock Grant Agreement Pursuant to the SEACOR Holdings Inc. Amended 2007 Share Incentive Plan
December 31, 2010 filed with the Commission on February 25, 2011).
10.25
Senior Secured Revolving Credit Facility Agreement by and among (1) Era Group Inc., (2) Wells Fargo Securities, LLC, JP
Morgan Chase Bank, N.A., Deutsche Bank Securities Inc., Suntrust Robinson Humphrey, Inc. and Regions Bank, as
mandated lead arrangers, (3) Wells Fargo Securities, LLC, JP Morgan Chase Bank, N.A., Deutsche Bank Securities Inc.,
Suntrust Robinson Humphrey, Inc. and Regions Bank, as bookrunners, (4) Wells Fargo Bank, National Association (“Wells
Fargo”), as administrative agent, (5) JP Morgan Chase Bank, N.A., as syndication agent, (6) Deutsche Bank Securities Inc.,
Suntrust Bank and Regions Bank, as co-documentation agents, (7) Compass Bank, Whitney Bank, Goldman Sachs Bank
USA, Comerica Bank and The Northern Trust Company, as managing agents, (8) Wells Fargo, as swing line bank, and (9)
banks and financial institutions whose names and addresses are set out in Schedule A to the agreement.
10.26+
Compensation Arrangements for the Executive Officers.
10.27+
Compensation of Non-Employee Directors.
21.1
List of Registrant’s Subsidiaries.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification by the Principal Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.2
Certification by the Principal Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1
Certification by the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
32.2
Certification by the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
101.INS**
XBRL instance Document
101.SCH**
XBRL Taxonomy Extension Schema
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase
170
Table of Contents
Exhibit
Number
Description
101.DEF**
XBRL Taxonomy Extension Definition Linkbase
101.LAB**
XBRL Taxonomy Extension Label Linkbase
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase
*
Incorporated herein by reference as indicated.
+
Management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 15 (b) of the rules governing the preparation of this Annual Report on
Form 10-K.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
171
Exhibit 10.25
AGREEMENT FOR
A
U.S. $350,000,000
SENIOR SECURED REVOLVING CREDIT FACILITY
TO BE MADE AVAILABLE TO
ERA GROUP INC.
BY
WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A.,
DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC.,
and REGIONS BANK,
as Mandated Lead Arrangers and Bookrunners
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
JPMORGAN CHASE BANK, N.A., as Syndication Agent
DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK and REGIONS BANK,
as Co-Documentation Agents
COMPASS BANK, WHITNEY BANK, GOLDMAN SACHS BANK USA, COMERICA
BANK and THE NORTHERN TRUST COMPANY,
as Managing Agents
AND
THE FINANCIAL INSTITUTIONS
IDENTIFIED ON SCHEDULE A,
as Lenders
December 22, 2011
INDEX
SECTION 1.
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
SECTION 2.
2.1.
SECTION 3.
3.1.
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
3.8.
3.9.
3.10.
3.11.
3.12.
3.13.
SECTION 4.
4.1.
4.2.
4.3.
4.4.
SECTION 5.
5.1.
5.2.
5.3.
5.4.
5.5.
SECTION 6.
6.1.
6.2.
6.3.
6.4.
6.5.
DEFINITIONS
1
Defined Terms
Computation of Time Periods; Other Definitional Provisions
Accounting Terms
Certain Matters Regarding Materiality
Forms of Documents
Headings
1
32
32
32
32
32
REPRESENTATIONS AND WARRANTIES
33
Representations and Warranties
33
ADVANCES OF THE FACILITY/LETTERS OF CREDIT
40
Purpose
Revolving Credit Advances
Swing Line Advances
Availability Generally
Revolving Credit Advance Drawdown Notice
Swing Line Advance Drawdown Notice
Drawdown Notice a Warranty
Notation of Advance on Note
Letters of Credit
Request for Issuance of Letter of Credit
Letter of Credit Payments Deemed Advances
Letter of Credit Participation
Collateral Account
40
40
40
41
41
42
42
42
42
43
43
44
45
CONDITIONS
46
Conditions Precedent to Drawdown of the Initial Advance under the Credit Facility
Further Conditions Precedent
Break Funding Costs
Satisfaction after Drawdown
46
50
50
50
REPAYMENT, PREPAYMENT AND REDUCTION
51
Repayment
Optional Prepayment
Mandatory Prepayment
Voluntary Permanent Reduction of the Committed Amount of the Credit Facility
Reduction of Commitment
51
51
51
51
51
INTEREST AND RATE
52
Applicable Rate
LIBOR; Interest Periods
Interest Payments
Interest Due Only on Banking Day
Calculation of Interest
52
52
52
52
52
SECTION 7.
PAYMENTS
52
Place of Payments, No Set Off
Proof of no Withholding
Federal Income Tax Credits
52
53
53
INTENTIONALLY OMITTED
53
[Intentionally Omitted]
53
EVENTS OF DEFAULT
54
Events of Default
Remedies
Indemnification
Application of Moneys
54
57
60
60
COVENANTS
61
Covenants
Helicopter Covenants
61
76
SECTION 11.
ASSIGNMENT AND PARTICIPATIONS
82
SECTION 12.
ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
83
Illegality
Increased Cost
Replacement of Lender or Participant
Non-availability of Funds
Determination of Losses
Compensation for Losses
83
83
84
85
86
86
CURRENCY INDEMNITY
86
Currency Conversion
Change in Exchange Rate
Additional Debt Due
Rate of Exchange
86
86
86
86
FEES AND EXPENSES
86
Commitment Fee
Letter of Credit and Facing Fees and Related Charges
Agency Fee
Underwriting Fee
Costs, Charges and Expenses
86
87
87
87
87
APPLICABLE LAW, JURISDICTION AND WAIVER
87
Applicable Law
Jurisdiction
Waiver of Jury Trial
87
88
88
THE AGENTS
88
Appointment of Agents
88
7.1.
7.2.
7.3.
SECTION 8.
8.1.
SECTION 9.
9.1.
9.2.
9.3.
9.4.
SECTION 10.
10.1.
10.2.
12.1.
12.2.
12.3.
12.4.
12.5.
12.6.
SECTION 13.
13.1.
13.2.
13.3.
13.4.
SECTION 14.
14.1.
14.2.
14.3.
14.4.
14.5.
SECTION 15.
15.1.
15.2.
15.3.
SECTION 16.
16.1.
ii
16.2.
16.3.
16.4.
16.5.
16.6.
16.7.
16.8.
16.9.
16.10.
16.11.
16.12.
16.13.
16.14.
16.15.
Distribution of Payments
Adjustments
Holder of Interest in Notes
No Duty to Examine, Etc.
Agents as Lenders
Obligations of Agents
Discretion of Agents
Assumption re Event of Default
No Liability of Agents and the Lenders
Indemnification of Agents
Consultation with Counsel
Resignation
Representations of Lenders
Notification of Event of Default
89
89
89
89
89
90
90
90
90
91
91
91
91
92
SECTION 17.
NOTICES AND DEMANDS
92
17.1.
Notices in Writing
Addresses for Notice
Notices Deemed Received
92
92
93
SECTION 18.
MISCELLANEOUS
94
18.1.
Time of Essence
Unenforceable, etc.; Provisions - Effect
References
Further Assurances
Entire Agreement; Amendments
USA Patriot Act Notice; OFAC and Bank Secrecy Act
Right of Set-Off
No Waiver, Remedies
Binding Effect
Confidentiality
Indemnification
94
94
94
94
94
95
95
95
96
96
96
17.2.
17.3.
18.2.
18.3.
18.4.
18.5.
18.6.
18.7.
18.8.
18.9.
18.10.
18.11.
iii
SCHEDULES
A
B
C
D
E
F
THE LENDERS AND THEIR COMMITMENTS
HELICOPTER OWNING SUBSIDIARIES AND OTHER SUBSIDIARIES
EXISTING LIENS
EXISTING INDEBTEDNESS
REQUIRED INSURANCE
TIERS
EXHIBITS
1
2
3
4
5
6
7
8
9
10
FORM OF NOTE
FORM OF DRAWDOWN NOTICE
FORM OF LETTER OF CREDIT REQUEST
FORM OF COMPLIANCE CERTIFICATE
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
FORM OF GUARANTY
FORM OF PLEDGE AGREEMENT
FORM OF SECURITY AGREEMENT
FORM OF MORTGAGE
FORM OF CASH COLLATERAL AGREEMENT
SENIOR SECURED REVOLVING CREDIT FACILITY AGREEMENT
THIS SENIOR SECURED REVOLVING CREDIT FACILITY AGREEMENT (this “Agreement”) is made this 22nd day of December, 2011,
and is by and among (1) ERA GROUP INC., a corporation incorporated under the laws of the State of Delaware (hereinafter called the
“Borrower”), (2) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC.,
SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers (in such capacity, collectively, the “Mandated
Lead Arrangers”), (3) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC.,
SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as bookrunners (in such capacity, together, the “Bookrunners”),
(4) WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as administrative agent (the “Administrative Agent”),
(5) JPMORGAN CHASE BANK, N.A., as syndication agent (the “Syndication Agent”), (6) DEUTSCHE BANK SECURITIES INC.,
SUNTRUST BANK and REGIONS BANK, as co-documentation agents (in such capacity, together, the “Co-Documentation Agents”),
(7) COMPASS BANK, WHITNEY BANK, GOLDMAN SACHS BANK USA, COMERICA BANK and THE NORTHERN TRUST
COMPANY, as managing agents (the “Managing Agents” and together with the Administrative Agent, the Syndication Agent, and the CoDocumentation Agents, the “Agents”) (8) Wells Fargo, as swing line bank (the “Swing Line Bank”) and (9) the banks and financial institutions
whose names and addresses are set out in Schedule A hereto (together with any assignee thereof pursuant to Section 11 and the Swing Line
Bank, the “Lenders”, and each a “Lender”).
WITNESSETH THAT:
WHEREAS, at the request of the Borrower, each of the Agents has agreed to act in its respective capacity as set forth herein and the
Lenders have agreed to provide to the Borrower a revolving credit facility in the amount of Three Hundred Fifty Million Dollars ($350,000,000),
including Letters of Credit not to exceed Fifty Million Dollars ($50,000,000) in the aggregate and a Swing Line Facility not to exceed Twenty
Five Million Dollars ($25,000,000), as such facility amount may be increased as provided herein, on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises, the covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy thereof are hereby acknowledged, the parties hereto agree as set forth below:
SECTION 1. DEFINITIONS
1.1. Defined Terms . In this Agreement the words and expressions specified below shall, except where the context otherwise requires, have
the meanings attributed to them below:
“ Acceptable Accounting Firm ”
means Ernst & Young, LLP or any other firm of independent certified public or chartered
accountants of international reputation selected by the Borrower and acceptable to the
Administrative Agent;
“ Acceptable Jurisdiction ”
means the United States, the United Kingdom, Canada, Norway, Sweden, Singapore and such
other country (excluding Brazil and Nigeria) as to which, immediately prior to any
registration in such other country of a Mortgaged Helicopter, the Administrative Agent and
the Syndication Agent have determined that: (i) such country either (A) imposes aircraft
maintenance standards applicable to Mortgaged Helicopters at least as stringent as those
approved by the FAA or (B) permits Mortgaged Helicopters to be maintained in accordance
with standards approved by the FAA and the Borrower and operator have agreed to maintain
such Mortgaged Helicopter in accordance with such standards; (ii) such country is a
jurisdiction with which the United States maintains normal diplomatic relations; (iii) such
country is not a country into which leasing or financing of Mortgaged Helicopters is forbidden
by applicable laws of the United States; (iv) such country is not subject to any sanction or
embargo by the European Union, the United Nations, the United Kingdom and/or the United
States; (v) under the laws and treaties in effect in such country, passive lenders, whether or
not such lenders hold a security interest in the Mortgaged Helicopters, will not be exposed to
tort or strict liability arising out of the operation of the Mortgaged Helicopters; (vi) under the
laws of such country it is not necessary by reason of the registration of such Mortgaged
Helicopter therein or for purposes of enforcing remedies for any secured creditor to register or
qualify to do business in such country; and (vii) either (x) the Cape Town Treaty has been
Fully Implemented in such country or (y) the laws of such country afford secured creditors
rights and remedies at least as favorable as those that would be available if the Cape Town
Treaty were Fully Implemented;
“ Account Bank ”
means the Administrative Agent or other financial institution with which a Deposit Account is
maintained;
“ Accounts Receivable ”
means accounts receivable as determined in accordance with GAAP;
“ Act ”
means part A of subtitle VII of title 49, United States Code;
“ Administrative Agent ”
shall have the meaning ascribed thereto in the preamble;
2
“ Advance ”
means a Revolving Credit Advance or a Swingline Advance;
“ Affiliate ”
shall mean, with respect to any Person, (i) any Person that directly, or indirectly through one
or more intermediaries, controls such Person (a “ Controlling Person ”) or (ii) any Person
(other than such Person or a Subsidiary of such Person) which is controlled by or is under
common control with a Controlling Person. For purposes of this definition, the term
“control” (including the terms “controlling”, “controlled by” and “under common control
with”) of a Person shall mean the power, direct or indirect, (i) to vote 10% or more of the
securities or other interests having ordinary voting power for the election of directors of such
Person or of Persons serving a similar function, or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise;
“ Agent ”
“ Agreement ”
means this senior secured revolving credit facility agreement as the same may be amended,
amended and restated, modified or supplemented from time to time;
“ Airframe ”
means (a) each Mortgaged Helicopter (excluding Engines or engines from time to time
installed thereon) set forth in Schedule B and any Replacement Airframe and (b) any and all
Parts incorporated or installed in or attached or appurtenant to such airframe, and any and all
Parts removed from such airframe, unless the Lien in favor of the Administrative Agent shall
not be applicable to such Parts in accordance with Section 10.2(c). Upon substitution of a
Replacement Airframe under and in accordance with the Agreement, such Replacement
Airframe shall become subject to the Agreement and shall be the “Airframe” for all purposes
of the Agreement and the other Security Documents and thereupon the Airframe for which the
substitution is made shall no longer be subject to the Agreement, and such replaced Airframe
shall cease to be the “Airframe”;
3
“ Applicable Law ”
means all applicable laws, treaties, judgments, decrees, injunctions, writs, actions and orders
of any court, governmental agency or authority and all applicable rules, guidelines,
regulations, orders, directives, licenses and permits of any governmental body,
instrumentality, agency or authority and all applicable interpretations thereof;
“ Applicable Margin ”
means a percentage per annum determined by reference to the ratio of Funded Debt to
EBITDA as set forth below:
Funded
Debt/EBITDA
Applicable
Margin LIBOR
Applicable
Margin – Base
Rate
<=5.0x
335bp
200bp
<=4.5x
310bp
180bp
<=4.0x
285bp
160bp
<=3.5x
260bp
140bp
<=3.0x
235bp
120bp
<=2.5x
210bp
100bp
The Applicable Margin for each Advance shall be determined by reference to the ratio of
Funded Debt to EBITDA at the time of such determination; provided , however , that (A) no
change in the Applicable Margin shall be effective until three (3) Banking Days after the date
on which the Administrative Agent receives or was entitled to receive the financial statements
required to be delivered pursuant to Section 10.1(a)(vi) and a certificate from the Borrower
demonstrating such ratio of Funded Debt to EBITDA pursuant to such Section and (B) (i)
during the period starting on the Closing Date and ending on the day which is three (3)
Banking Days after the day upon which the Administrative Agent receives the information
described in clause (A) of this proviso, the Applicable Margin shall be (i) 260 bp for LIBOR
Advances and (ii) 140 bp for Base Rate Advances and Swing Line Advances and (iii)
thereafter, the Applicable Margin shall be determined by reference to the ratio of Funded Debt
to EBITDA at the time of such determination, provided , further , that, notwithstanding the
foregoing, the Borrower shall remain obligated to comply with the provisions of Section 10 at
all times;
“ Applicable Rate ”
means any rate of interest on any Advance from time to time applicable pursuant to
Section 6.1;
4
“ Assignment and Assumption Agreement(s) ”
shall mean the Assignment and Assumption Agreement(s) executed pursuant to Section 11
substantially in the form of Exhibit 5;
“ Aviation Authority ”
means, with respect to any Mortgaged Helicopter, any Governmental Authority that is or shall
from time to time be vested with the control and supervision of, or have jurisdiction over, the
registration, airworthiness and operation of helicopters or other matters relating to civil
aviation in the State of Registration of such Mortgaged Helicopter under Applicable Law;
“ Banking Day(s) ”
means day(s) on which banks are open for the transaction of business of the nature required
by this Agreement in the City of New York, State of New York;
“ Base Rate ”
means a fluctuating interest rate per annum in effect from time to time, which rate per annum
shall at all times be equal to the highest of: (a) the Prime Rate, (b) the Federal Funds Effective
Rate plus 1 / 2 of one percent per annum and (c) the daily LIBOR for a one month Interest
Period plus the difference between Applicable Margin for LIBOR Advances and the
Applicable Margin for Base Rate Advances;
“ Base Rate Advance ”
means a Revolving Credit Advance the interest on which is calculated based on the Base Rate
plus the Applicable Margin;
“ Basis Point” or the symbol “ bp ”
means one one-hundredth of one percent (0.01%);
“ Benefitted Lender ”
shall have the meaning ascribed thereto in Section 16.3;
“ Bookrunners ”
“ Cape Town Treaty ”
means the Cape Town Convention on International Interests in Mobile Equipment as
supplemented by the Protocol to the Convention on International Interests in Mobile
Equipment on Matters Specific to Aircraft Equipment, concluded in Cape Town, South Africa
on November 16, 2001;
5
“ Cash and Cash Equivalents ”
means (i) cash, (ii) securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof ( provided that the full faith and
credit of the United States of America is pledged in support thereof), (iii) time deposits,
certificates of deposit or deposits in the interbank market of any commercial bank of
recognized standing organized under the laws of the United States of America, any state
thereof or any foreign jurisdiction and rated at least A or the equivalent thereof by S&P, and
(iv) bonds of any county, municipality or state of the United States or any corporation
organized and existing under the laws of the United States or any state thereof (including the
District of Columbia) having an investment grade rating (or equivalent) by one of the
nationally recognized rating organizations that regularly engages in rating such bonds;
“ Cash Collateral Agreement ”
means a cash collateral agreement in substantially the form of Exhibit 10;
“ Change of Control ”
means (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) other than Seacor becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the total
voting power of the Borrower or (b) SEACOR no longer holds the majority of the voting
power of the Borrower and any “person” other than SEACOR has a higher percentage of the
voting control of the Borrower than SEACOR or (c) the Board of Directors of the Borrower
ceases to consist of a majority of the existing directors or directors elected by the existing
directors;
“ Closing Date ”
means December ___, 2011;
“ Co-Documentation Agent(s) ”
“ Code ”
means the Internal Revenue Code of 1986, as amended, and any successor statute and the
regulations promulgated thereunder;
6
“ Collateral ”
means the Mortgaged Helicopters, Accounts Receivable, Inventory and all other property of
the Security Parties as identified and set forth in the Security Documents;
“ Commitment ”
shall mean in relation to a Lender, the amount of the Credit Facility set out opposite its name
in Schedule A hereto or, if such Lender has entered into one or more Assignment and
Assumption Agreements, set forth for such Lender in the Register;
“ Commitment Fee Rate ”
means a percentage per annum determined by reference to the ratio of the Borrower’s Funded
Debt to the Borrower’s EBITDA as set forth below:
Funded Debt/EBITDA
Commitment Fee Rate
<=5.0x
70.0bp
<=4.5x
60.0bp
<=4.0x
50.0bp
<=3.5x
50.0bp
<=3.0x
37.5bp
<=2.5x
25.0bp
The Commitment Fee Rate shall be determined by reference to the ratio of the Borrower’s
Funded Debt to the Borrower’s EBITDA at the time of such determination; provided ,
however , that (A) no change in the Commitment Fee Rate shall be effective until three (3)
Banking Days after the date on which the Administrative Agent receives or was entitled to
receive the financial statements required to be delivered pursuant to Section 10.1(a)(vi) and a
certificate from the Borrower demonstrating such ratio of Funded Debt to EBITDA pursuant
to such Section and (B) (i) during the period starting on the Closing Date and ending on the
day which is three (3) Banking Days after the day upon which the Administrative Agent
receives the information described in clause (A) of this proviso, the Commitment Fee Rate
shall be 50.0 bp and (ii) thereafter, the Commitment Fee Rate shall be determined by
reference to the ratio of Funded Debt to EBITDA at the time of such determination, provided ,
further , that, notwithstanding the foregoing, the Borrower shall remain obligated to comply
with the provisions of Section 10 at all times;
7
“ Commitment Increase ”
means a one-time increase in the Committed Amount over the Initial Commitment of up to
One Hundred Million Dollars ($100,000,000), or such lesser amount as may be agreed, such
increase to be in increments of $50,000,000, as provided in Section 3.1;
“ Committed Amount ”
means the aggregate of the Initial Commitment and any Commitment Increase, being the
maximum aggregate principal amount of the Advances and Letters of Credit which may be
outstanding at any time under the Credit Facility; provided that the Committed Amount in
respect of Letters of Credit shall not exceed the Letter of Credit Limit and the Committed
Amount in respect of Swing Line Advances shall not exceed the Swing Line Commitment;
“ Compliance Certificate ”
means a certificate of the chief financial officer of the Borrower substantially in the form of
Exhibit 4;
“ Confidential Information ”
means information that any Security Party furnishes to the Administrative Agent or any other
Creditor in a writing designated as confidential, but does not include any such information
that is or becomes generally available to the public or that is or becomes available to the
Administrative Agent or such other Creditor from a source other than the Security Parties;
“ Consolidated Net Worth ”
for any period, shall mean, for any company, the sum of such company’s common and
preferred stock (excluding any capital stock subject to mandatory redemption but including
the SEACOR Preferred Shares) and additional paid-in-capital, plus retained earnings (minus
accumulated deficit) and currency translation adjustments, all as shown on the consolidated
balance sheet of such company and its subsidiaries as determined in accordance with GAAP;
“ Consolidated Subsidiary ”
shall mean a Subsidiary the financial results of which are reflected in the Borrower’s
consolidated financial statements;
8
“ Consolidated Subsidiary Guaranty ”
shall mean a guaranty issued by a Consolidated Subsidiary of the types of obligations listed in
sub-clauses (i) through (iii) of the definition of Subsidiary Funded Debt for the benefit of
other Consolidated Subsidiaries but excluding, in the case of a Consolidated Subsidiary which
is not a Wholly-Owned Subsidiary, that proportion of the amount of such guaranty which
represents the minority interest holders’ share of such Guaranty;
“ Conversion Date ”
“ Credit Facility ”
means the sums advanced or to be advanced by the Lenders to the Borrower and the Letters of
Credit to be issued by the Letter of Credit Issuers for the account of the Borrower in the initial
maximum principal amount of Three Hundred Fifty Million Dollars ($350,000,000) as may
be increased by the Commitment Increase all pursuant to, and subject to the terms of, this
Agreement;
“ Credit Facility Balance ”
means the sum of (i) the amount of the Advances and (ii) the amount of the Letter of Credit
Outstandings at any relevant time, pursuant to the terms of this Agreement;
“ Credit Period ”
means the period from the Drawdown Date of the initial Advance made hereunder to the date
upon which the Advances and all other amounts due to the Agents and the Lenders pursuant
to this Agreement and the Notes are repaid or prepaid in full and all commitments to extend
credit and issue Letters of Credit under this Agreement have been terminated;
“ Creditors ”
means, together, the Agents, the Mandated Lead Arrangers, the Bookrunners and the Lenders,
and each, a “Creditor”;
“ Default Rate ”
“ Deposit Account(s) ”
means any and all deposit accounts maintained by the Borrower or any of its Subsidiaries with
the Administrative Agent or any other financial institution;
“ Deposit Account Control Agreement(s) ”
means any control agreement entered into by and among the relevant Account Bank, the
Borrower or any of its Subsidiaries, and the Administrative Agent in respect of a Deposit
Account pursuant to the terms of the Security Agreement;
9
“ De-Registration Event ”
shall have the meaning ascribed thereto in Section 10.1(a)(xxvi)(a);
“ Dollars” and the sign “$”
means the legal currency, at any relevant time hereunder, of the United States of America and,
in relation to all payments hereunder, in same day funds settled through the New York
Clearing House Interbank Payments System (or such other Dollar funds as may be determined
by the Administrative Agent to be customary for the settlement in New York City of banking
transactions of the type herein involved);
“ Drawdown Dates ”
means the dates, each being a Banking Day falling prior to the Termination Date, upon which
the Borrower has requested that an Advance be made available to the Borrower or an
Advance is deemed to have been made due to a drawing under any Letter of Credit;
“ Drawdown Notice ”
“ EBITDA ”
means on a consolidated basis, the aggregate, to be measured on a trailing twelve (12) month
basis, of (i) operating income (before deductions for interest, taxes, depreciation and
amortization), (ii) interest income, (iii) Cash distributions from companies owned fifty percent
(50%) or less by the Borrower, (iv) Cash proceeds from any sale of assets, and (v) EBITDA
(as determined in accordance with clauses (i) through (iv) above) from acquired companies, if
any, on a trailing twelve month basis based on audited and interim financial statements for
such acquired companies, provided , however , that in determining EBITDA there shall be
excluded from expenses, as applicable, $2,342,000 for the fiscal quarter ending March 31,
2011; $2,844,000 for the fiscal quarter ending June 30, 2011; $2,290,000 for the fiscal quarter
ending September 30, 2011 and $2,492,000 for the fiscal quarter ending December 31, 2011
of general and administrative expenses allocated by SEACOR to the Borrower, it being
agreed that SEACOR shall cease to allocate general and administrative expenses to the
Borrower beginning with the fiscal quarter after the Closing Date;
10
“ Eligible Assignee ”
means: (a) any commercial bank organized under the laws of the United States, or any State
thereof, and having total assets in excess of $1,000,000,000, (b) any commercial bank
organized under the laws of any other country that is a member of the Organization for
Economic Cooperation and Development (the “OECD”) or has concluded special lending
arrangements with the International Monetary Fund Associated with its General
Arrangements to Borrow, or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, so long as such bank is acting through a branch or agency
located in the United States or in the country in which it is organized or another country that is
described in this clause (b), or (c) the central bank of any country that is a member of the
OECD;
“ Eligible Lease ”
means a lease agreement pursuant to which a Mortgaged Helicopter is leased by the Borrower
or a Helicopter Owning Subsidiary, as owner and lessor of the Mortgaged Helicopter, to an
Eligible Lessee, which lease agreement satisfies all of the following requirements: (i) such
lease is a true lease, is not a conditional sale agreement or a financing lease and does not
transfer to the lessee any right of ownership or equity in the Mortgaged Helicopter or any
right to purchase or acquire ownership or an equity interest in the Mortgaged Helicopter other
than at fair market value; (ii) such lease has a term of not more than ten (10) years (including
all renewal terms); (iii) such lease is transacted on an arms length basis; (iv) such lease
requires either the lessor or the lessee to provide the Required Insurance in respect of such
Mortgaged Helicopter; (v) such lease requires either the lessor or the lessee to maintain the
registration of the Mortgaged Helicopter in an Acceptable Jurisdiction; (vi) such lease
requires either the lessor or the lessee to maintain the Mortgaged Helicopter in accordance
with industry standards; (vii) subject to the customary rights of quiet enjoyment granted to
such lessee, the rights of lessee thereunder are expressly made subject and subordinate to the
rights of the Administrative Agent as secured party under the Security Agreement and the
Mortgage in respect of such Mortgaged Helicopter; (viii) such lease restricts the use of such
Mortgaged Helicopter to use primarily within an Acceptable Jurisdiction; (ix) such lease
prohibits subleases (except subleases that comply with this
11
definition of “Eligible Lease”); (x) such lease requires that the Mortgaged Helicopter be
operated and maintained in accordance with all Applicable Laws, in a manner such that the
Required Insurance remains in effect at all times; (xi) such lease contains operational
indemnities by the lessee in favor of the Borrower, the Helicopter Owning Subsidiary, and, to
the extent consistent with industry practice, the Creditors; (xii) such lease requires a return of
the Mortgaged Helicopter and all related Records upon any termination of the lease with
either a valid certificate of airworthiness issued by the FAA or the applicable Aviation
Authority or a valid certificate of airworthiness for export to the United States or such other
Acceptable Jurisdiction as the Administrative Agent may agree in effect with respect to such
Mortgaged Helicopter; (xiii) all right, title and interest of the Borrower or the Helicopter
Owning Subsidiary, as lessor, under such lease have been pledged to the Administrative
Agent and has been perfected as required by all Applicable Laws; and (xiv) such lease shall
be governed by the laws of an Acceptable Jurisdiction;
“ Eligible Lessee ”
means a lessee of a Mortgaged Helicopter under an Eligible Lease, which lessee satisfies each
of the following requirements at the time that such Eligible Lease becomes effective: (a) such
lessee is not subject to an Insolvency Proceeding upon the commencement of the Eligible
Lease with such lessee; (b) such lessee is in compliance with the material terms of all leases
with which such lessee has entered into with the Borrower or any of the Helicopter Owning
Subsidiaries; (c) except for United States entities or agencies (whether federal or state), such
lessee is not a governmental entity or agency or otherwise able to claim sovereign immunity
as a defense or shall have waived any such sovereign immunity to the satisfaction of the
Administrative Agent; (d) such lessee, if not formed or incorporated under federal or state
laws of the United States or if not a United States federal or state agency or entity, shall have
executed an IDERA; and (f) such lessee is organized under the laws of, and is domiciled in,
an Acceptable Jurisdiction;
12
“ Engine ”
means (a) each of the engines listed on Schedule B and installed on the Mortgaged
Helicopters on the date hereof, and any Replacement Engine, in any case whether or not from
time to time installed on such Airframe or installed on any other airframe or helicopter, and
(b) any and all Parts incorporated or installed in or attached or appurtenant to such engine, and
any and all Parts removed from such engine, unless the Lien in favor of the Administrative
Agent shall not apply to such Parts in accordance with Section 10.2(c). Upon substitution of a
Replacement Engine under and in accordance with the Agreement, such Replacement Engine
shall become subject to the Agreement and shall be an “Engine” for all purposes of the
Agreement and the other Security Documents and thereupon the Engine for which the
substitution is made shall no longer be subject to the Agreement, and such replaced Engine
shall cease to be an “Engine”;
“ Environmental Affiliate ”
means any person or entity the liability of which for Environmental Claims the Borrower or
any Helicopter Owning Subsidiary may have assumed by contract or operation of law;
“ Environmental Approvals ”
shall have the meaning ascribed thereto in Section 2.1(q);
“ Environmental Claim ”
“ Environmental Laws ”
“ Equity Interests ”
means, with respect to any Person, shares of equity interests of (or other ownership or profit
interests in) such Person, warrants, options or other rights for the purchase or other acquisition
from such Person of shares of equity interests of (or other ownership or profit interests in)
such Person, securities convertible into or exchangeable for shares of equity interests of (or
other ownership or profit interests in) such Person or warrants, rights or options for the
purchase or other acquisition from such Person of such shares (or such other interests), and
other ownership or profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are authorized or otherwise existing on any
date of determination;
13
“ ERISA ”
means the Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated and rulings issued thereunder;
“ ERISA Affiliate ”
means a trade or business (whether or not incorporated) which is under common control with
the Borrower within the meaning of Sections 414(b), (c), (m) or (o) of the Code;
“ ERISA Group ”
means the Borrower and its subsidiaries within the meaning of Section 424(f) of the Code;
“ Events of Default ”
means any of the events set out in Section 9.1;
“ Event of Loss ”
means in respect of any Mortgaged Helicopter any of the following: (a) loss of such
Mortgaged Helicopter or its use due to theft or disappearance for a period in excess of thirty
(30) consecutive days, (b) destruction, damage beyond economic repair or rendition of such
Mortgaged Helicopter which results in such Mortgaged Helicopter being permanently unfit
for normal use for any reason whatsoever; (c) any damage to such Mortgaged Helicopter
which results in an insurance settlement with respect to such Mortgaged Helicopter on the
basis of a total loss or on the basis of a compromised or constructive total loss; or (d) the
condemnation, confiscation, appropriation or seizure of, or requisition of title to such
Mortgaged Helicopter, or the use of such Mortgaged Helicopter by, or on the authority of, any
governmental entity or purported governmental entity, which in any such case shall have
resulted in the loss of possession thereof by the Borrower, the related Helicopter Owning
Subsidiary or the related Eligible Lessee thereof for a period in excess of ninety (90)
consecutive days (or for such shorter period ending on the date which is seven (7) days from
the date of receipt of an insurance settlement with respect to such property on the basis of a
total loss);
14
“ Exchange Act ”
means the Securities and Exchange Act of 1934, as amended;
“ Extended Letters of Credit ”
“ FAA ”
means the Federal Aviation Administration of the United States Department of Transportation
or any successor organization thereto;
“ Facing Fee ”
“ Fair Market Value ”
means, in respect of any Helicopter, the cash purchase price for such Helicopter, expressed in
Dollars, which would be arrived at by a willing buyer and an unrelated willing seller, both
acting at arms-length, neither under any compulsion to buy or sell, and both with full
knowledge of all relevant facts, on the assumption that such Helicopter would be delivered
free and clear of all Liens but otherwise in the condition determined by a inspection of the
Helicopter and all Records, as determined by a “desk top” appraisal by an independent aircraft
appraisal expert approved by the Majority Lenders (in the reasonable exercise of their
discretion), obtained by the Borrower in accordance with the terms of this Agreement or, in
the case of Helicopters acquired since the date of the most recent such appraisal, the purchase
price or invoice price thereof;
“ Federal Funds Effective Rate ”
means, for any period, a fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if
such day is not a Banking Day, for the next preceding Banking Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a Banking Day,
the average of the quotations for such day on such transactions received by the Administrative
Agent from three (3) Federal Funds brokers of recognized standing selected by the
Administrative Agent;
15
“ Foreign Plan ”
means an employee benefit plan that would be covered by Title IV of ERISA but which is
excluded from coverage under ERISA by Section 4(b)(4) thereof and is maintained or
contributed to by the Borrower, ERISA Affiliate or a member of ERISA Group or with
respect to which the Borrower, an ERISA Affiliate or a member of ERISA Group could have
any liability;
“ Fully Implemented ”
means, in respect of the Cape Town Treaty and any country, as determined by the
Administrative Agent and the Syndication Agent, that: (a) the Cape Town Treaty has come
into full force and effect in such country; (b) such country has made acceptable declarations
thereunder, including declarations opting in to Articles VIII, XII, XIII, X (with a number of
days not greater than five (5) or such other number that is acceptable the Administrative
Agent in its sole discretion) and XI (providing for Alternative A with a waiting period not
longer than 60 days) of the Protocol and the mandatory declaration under Article 54(2) of the
Cape Town Convention; and (c) all amendments to the local substantive laws (including
Insolvency Laws) and procedural laws of such country necessary to implement the Cape
Town Treaty and the declarations thereunder referenced in clause (b) of this definition to
come into full force and effect;
“ Funded Debt ”
means, on a consolidated basis, the sum of (i) indebtedness for borrowed money, all
obligations evidenced by bonds, debentures, notes or similar instruments, and purchase money
obligations which, in accordance with GAAP, would be shown on the consolidated balance
sheet as a liability, (ii) all obligations arising under Letters of Credit, (iii) all obligations as
lessee under leases which have been, in accordance with GAAP, recorded as capitalized lease
obligations, (iv) guaranties of non-consolidated entity obligations but excluding indebtedness
which is consolidated in the Borrower’s published financial statements in accordance with
GAAP but which represents a minority interest holders’ share of such indebtedness unless
such minority interest holders’ share has been guaranteed by the Borrower or a Subsidiary;
“ GAAP ”
16
“ Government Entity ”
means (a) any federal, state, provincial or similar government, and any body, board,
department, commission, court, tribunal, authority, agency or other instrumentality of any
such government or otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Agreement or relating to the observance or
performance of the obligations of any of the parties to this Agreement or the other Security
Documents;
“ Guarantors ”
means all Subsidiaries (i) whose jurisdiction of incorporation or formation, as the case may
be, is a state in the United States of America and which are wholly-owned by the Borrower,
directly or indirectly and (ii) whose jurisdiction of incorporation or formation, as the case may
be, is not a state in the United States of America but who owns Mortgaged Helicopters;
“ Guaranty ”
means the guaranty to be executed by the Guarantors in respect of the obligations of the
Borrower under and in connection with this Agreement and the Note in favor of the
Administrative Agent pursuant to Section 4.l(b), substantially in the form of Exhibit 6;
“ Helicopter(s) ”
means all Airframes, together with the Engines owned directly or indirectly by the Borrower
and any of its Subsidiaries together with all related Records;
“ Helicopter Owning Subsidiaries ”
means those Subsidiaries designated as Helicopter Owning Subsidiaries on Schedule B,
together with any future subsidiaries now or hereafter acquired which own Mortgaged
Helicopters;
“ Helicopter Related Document ”
means any agreement relating to a Mortgaged Helicopter or agreements relating to the use,
maintenance or management of a Mortgaged Helicopter, whether in existence on the date
hereof or thereafter acquired, including, but not limited to, all leases, all purchase agreements,
all bills of sale, all assignment agreements, all lease assignments, all lessee consents, any
credit support (including any guarantee or letter of credit supporting any related lessee) and
each other document, certificate or opinion delivered or caused to be delivered by any lessee
or Borrower pursuant thereto;
17
“ IDERA ”
means an irrevocable de-registration and export request authorization, providing for the
irrevocable delegation of authority to the Borrower or the applicable Helicopter Owning
Subsidiaries to deregister and export the related Mortgaged Helicopter to the United States,
which shall be in a form meeting the requirements of the Cape Town Treaty;
“ Indebtedness ”
of any Person means and includes all obligations of such Person which in accordance with
GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person;
“ Indemnified Party ”
“ Initial Commitment ”
means Three Hundred Fifty Million Dollars ($350,000,000);
“ Insolvency Law ”
means the Federal Bankruptcy Code of 1978, as amended or similar law in any applicable
jurisdiction;
“ Insolvency Proceeding ”
means any proceeding under any applicable Insolvency Law seeking liquidation,
reorganization, winding up or other relief with respect to any Person or its debts;
“ International Interest ”
shall have the meaning ascribed thereto in the Cape Town Treaty;
“ International Registry ”
shall have the meaning ascribed thereto in the Cape Town Treaty;
“ Interest Coverage Ratio ”
means, on a consolidated basis, (a) EBITDA minus dividends and distributions (other than
dividends on, or a redemption of, the SEACOR Preferred Shares (if issued) divided by
(b) interest expense (including interest attributable to capitalized leases) in accordance with
GAAP, during the four (4) fiscal quarters preceding the date on which such ratio is
determined, provided, however, that with respect to the first three fiscal quarters in calendar
year 2012, for purposes of determining interest
18
expense, interest expense shall be calculated on an annualized pro forma basis as follows: (i)
for the fiscal quarter ending March 31, 2012, the actual interest expense for such period
multiplied by four, (ii) for the two fiscal quarters ending June 30, 2012, the actual interest
expense for such periods multiplied by two, and (iii) for the three full fiscal quarters ending
September 30, 2012, the actual interest expense for such periods multiplied by four-thirds;
“ Interest Notice ”
means a notice to the Administrative Agent specifying the duration of the relevant Interest
Period;
“ Interest Period(s) ”
means, with respect to a LIBOR Advance, period(s) of one (1), three (3), six (6), nine (9) or
twelve (12) months selected by the Borrower or such other period(s) as the Lenders may
agree;
“ Inventory ”
means inventory as determined in accordance with GAAP;
“ Investment ”
means (i) lending money or credit or making advances to any Person, (ii) purchasing or
acquiring any stock, obligations or securities of, or any other interest in, or making capital
contributions to any Person or (iii) guaranteeing the debt or obligations of any other Person;
“ Issuing Subsidiary ”
means, the Subsidiary which is the primary obligor on Subsidiary Funded Debt; provided that
in the case of Subsidiary Funded Debt where (i) one or more other Subsidiaries are jointly or
jointly and severally liable in respect thereof (other than by way of guaranty) or (ii) no
Subsidiary is the primary obligor in respect of a Subsidiary Funded Debt but two or more
Subsidiaries have issued Non-Consolidated Entity Guaranties in respect of the same
obligation, the Subsidiary liable in respect thereof with the highest book value shall be
deemed to be such primary obligor;
“ Joint Venture ”
means at any date any Person (other than a Subsidiary) in which the Borrower or any
Subsidiary has an ownership interest or other interests in profits or loss which would be
accounted for in the consolidated financial statements of the Borrower and its consolidated
Subsidiaries using the equity method of accounting if such statements were prepared as of
such date;
19
“ Judgment Currency ”
“ L/C Cash Collateral Account ”
shall have the meaning set forth in Section 3.13;
“ L/C Supportable Obligation(s) ”
means such obligations of the Borrower as are not inconsistent with the issuance policies of
the applicable Letter of Credit Issuer; no Letter of Credit may be payable (1) to any entity or
person who is subject to sanctions issued by the United States Department of Commerce or to
whom payment is prohibited by the Foreign Asset Control Regulations of the Department of
the Treasury or (2) which otherwise is in contravention of applicable laws and regulations;
“ Lender(s) ”
“ Letter(s) of Credit ”
“ Letter of Credit Fee ”
“ Letter of Credit Issuer ”
means, with respect to each Letter of Credit, the Lender (being one of the Mandated Lead
Arrangers, Bookrunners or Agents) which, at the request of the Borrower, agrees to issue and
issues the same;
“ Letter of Credit Limit ”
means, at any time, the lesser of (a) $50,000,000 and (b) an amount equal to $50,000,000 less,
in either case, the sum of (i) the aggregate amount of the Letter of Credit Outstandings at such
time, and (ii) the aggregate available amount of all Letters of Credit outstanding at such time;
“ Letter of Credit Outstandings ”
means, at any time, the aggregate Stated Amount of all outstanding Letters of Credit, less any
drawings previously made thereunder;
“ Letter of Credit Participant ”
20
“ Letter of Credit Participant Percentage ”
means, in relation to a Lender, the percentage of the Credit Facility set out opposite its name
in Schedule A hereto; provided , however , that in the case of Extended Letters of Credit, the
percentage shall be adjusted to include only the Commitments of the Lenders participating in
the Extended Letters of Credit;
“ Letter of Credit Request ”
“ LIBOR ”
means the rate (rounded upward to the nearest 1/16 th of one percent (1%)) for deposits of
Dollars for a period equivalent to the relevant Interest Period at or about 11:00 a.m. (London
time) on the second London Banking Day before the first day of such period as displayed on
Telerate page LIBOR01 (British Bankers’ Association Interest Settlement Rates) (or such
other page as may replace such page LIBOR01 on such system or on any other system of the
information vendor for the time being designated by the British Bankers’ Association to
calculate the BBA Interest Settlement Rate (as defined in the British Bankers’ Association’s
Recommended Terms and Conditions (“BBAIRS” terms) dated August 1985)); provided that
if on such date no such rate is so displayed for the relevant Interest Period, LIBOR for such
period shall be the rate quoted to the Lenders by the Reference Banks at the request of the
Lenders as the offered rate for deposits of Dollars in an amount approximately equal to the
amount in relation to which LIBOR is to be determined for a period equivalent to the relevant
Interest Period to prime banks in the London Interbank Market at or about 11:00 a.m.
(London time) on the second Banking Day before the first day of such period;
“ LIBOR Advance ”
means a Revolving Credit Advance, the interest on which is calculated based on LIBOR plus
the Applicable Margin;
“ LIBOR Reference Day(s) ”
a day or days on which banks in the London interbank market generally will provide
quotations for deposits in the relevant currencies;
“ Lien ”
means any interest in property securing an obligation owed to, or a claim by, a Person other
than the owner of the property, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest lien arising from a
21
mortgage, encumbrance, pledge, conditional sale, title retention agreement or trust receipt or a
lease, consignment or bailment for security purposes or any arrangement having substantially
the same legal effect as the foregoing;
“ List of Liens ”
means a list of Liens in respect of Secured Debt on all Helicopters owned by the Borrower or
any Helicopter Owning Subsidiary;
“ Majority Lenders ”
means Lenders whose aggregate Commitments exceed fifty percent (50%) of the total
Commitments;
“ Managing Agents ”
“ Mandated Lead Arrangers ”
“ Material Adverse Change ”
means the occurrence of an event or condition which (a) materially impairs the ability of
(1) the Borrower to meet any of its obligations with regard to the Credit Facility and the
financing arrangements established in connection therewith or (2) the Borrower and the
Subsidiaries to meet any of their respective other obligations that are material to the Borrower
and the Subsidiaries considered as a whole or (b) has a material adverse effect on the
business, assets, operations, property or financial condition of the Borrower and the
Subsidiaries considered as a whole;
“ Materials of Environmental Concern ”
“ Mortgaged Helicopters ”
means all Helicopters (including the Engines installed thereon) registered in an Acceptable
Jurisdiction and which are listed on Schedule B, as the same may be amended and
supplemented as provided in Sections 10.1(a)(xxvi) and (xxvii) to reflect the deletion or
addition of Mortgaged Helicopters in accordance with the terms hereof, together with all
related Records;
22
“ Mortgages ”
means, with respect to the Mortgaged Helicopters, a mortgage (which may, in appropriate
circumstances, include a fleet mortgage) in the form recommended by local Aviation
Authority counsel (including as to governing law and language, or in the case of a Mortgage
to be filed with the FAA, special New York counsel to the Administrative Agent) in order to
convey a first priority and perfected mortgage lien on such Mortgaged Helicopter and as shall
be acceptable to the Administrative Agent and the Borrower;
“ Mortgage Filing ”
means, in respect of each Mortgaged Helicopter, the execution and delivery by the Borrower
or Helicopter Owning Subsidiary of a Mortgage on such Mortgaged Helicopter, and the filing
thereof in the appropriate filing office in the applicable jurisdiction so as to perfect the
Administrative Agent’s lien thereon in such jurisdiction; provided that, in addition to such
filing, this term shall also require registrations with respect to such Mortgaged Helicopter to
be effected at the International Registry to reflect the International Interest of the
Administrative Agent for the benefit of the Creditors therein;
“ Multiemployer Plan ”
means, at any time, a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to
which the Borrower or any ERISA Affiliate is making or accruing an obligation to make
contributions or has within any of the six preceding plan years made or accrued an obligation
to make contributions;
“ Multiple Employer Plan ”
means, at any time, an employee benefit plan, other than a Multiemployer Plan, subject to
Title IV of ERISA, to which the Borrower or ERISA Affiliate, and one or more employers
other than the Borrower, ERISA Affiliate or a member of the ERISA Group, is making or
accruing an obligation to make contributions or, in the event that any such plan has been
terminated, to which the Borrower, ERISA Affiliate, or a member of the ERISA Group made
or accrued an obligation to make contributions during any of the five plan years preceding the
date of termination of such plan;
“ Non-Consolidated Entity ”
means an entity which is not a Consolidated Subsidiary;
23
“ Non-Consolidated Entity Guaranty ”
means a guaranty issued by a Consolidated Subsidiary of obligations of Non-Consolidated
Entities of the types listed in sub-clauses (i) through (iii) of the definition of Subsidiary
Funded Debt but excluding, in the case of a Consolidated Subsidiary which is not a WhollyOwned Subsidiary, that proportion of the amount of such Guaranty which represents the
minority interest holders’ share of such Guaranty;
“ Note(s) ”
means a promissory note to be executed by the Borrower in favor of a Lender to evidence the
Advances of the Credit Facility made by such Lender substantially in the form of Exhibit 1 or
in such other form as the Administrative Agent may agree;
“ Other Subsidiaries ”
means, as it relates to any Subsidiary Funded Debt, those Subsidiaries liable in respect thereof
other than the Issuing Subsidiary;
“ Parts ”
means all appliances, parts, components, instruments, appurtenances, accessories, furnishings,
seats and other equipment of whatever nature (other than (a) Engines or engines, and (b) any
Removable Part leased by the Borrower (or the applicable Helicopter Owning Subsidiary)
from a third party or subject to a security interest granted to a third party), that may from time
to time be installed or incorporated in or attached or appurtenant to the Airframe or any
Engine or removed therefrom unless the Lien in favor of the Administrative Agent shall not
be applicable thereto in accordance with Section 10.2(c) of the Agreement;
“ Permitted Liens ”
means any of the liens permitted under Section 10.1(b)(i);
“ Person ”
shall mean an individual, partnership, corporation, limited liability company, business trust,
bank, trust company, joint venture, association, joint stock company, trust or other
unincorporated organization, whether or not a legal entity, or any government or agency or
political subdivision thereof;
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“ Plan ”
means any employee benefit plan (other than a Multiemployer Plan or a Multiple Employer
Plan) covered by Title IV of ERISA to which the Borrower, ERISA Affiliate or a member of
the ERISA Group is making or accruing an obligation to make contributions or, in the event
that any such plan has been terminated, to which the Borrower, ERISA Affiliate or a member
of ERISA Group made or accrued an obligation to make contributions during any of the five
plan years preceding the date of termination of such plan;
“ Pledge Agreement ”
means the pledge agreement in favor of the Administrative Agent executed by the Borrower
with respect to its Equity Interests in the Guarantors pursuant to Section 4.1(b) substantially in
the form set out in Exhibit 7, together with appropriate irrevocable proxies, undated share
transfers, undated resignations of all directors or officers of the Person whose interests are
pledged, and certificates evidencing such shares (as applicable);
“ Prime Rate ”
means, at any time, the rate of interest per annum publicly announced from time to time by
Wells Fargo as its prime rate. Each change in the Prime Rate shall be effective as of the
opening of business on the day such change in such prime rate occurs. The parties hereto
acknowledge that the rate announced publicly by Wells Fargo as its prime rate is an index or
base rate and shall not necessarily be its lowest or best rate charged to its customers or other
banks;
“ Qualified Equity Recapitalization ”
means an initial public offering or a private placement of equity by the Borrower;
“ Qualified Notes Offering ”
means an unsecured senior notes offering (i) which is non-amortizing with a maturity date
after the Termination Date and (ii) which results in a permanent reduction of the Credit
Facility by no less than US$150,000,000 pursuant to the terms of Section 10.1(a)(xxxiii);
“ Rate of Exchange ”
“ Reference Banks ”
means the banks chosen from time to time by the British Bankers’ Association for the purpose
of establishing Interest Settlement Rates;
25
“ Records ”
means, with respect to each Mortgaged Helicopter (i) the documents (including microfilm),
data, manuals, diagrams and other written information originally furnished by the
manufacturer and/or seller on or about the date of acquisition by the Borrower or relevant
Helicopter Owning Subsidiary, (ii) the documents, records, logs and other data maintained in
respect of the Mortgaged Helicopter, pursuant to the terms of the applicable Eligible Lease
related to such Mortgaged Helicopter, during the term of such Eligible Lease and to which
Borrower or such Helicopter Owning Subsidiary has a right to possession and receives
possession following the termination of such Eligible Lease, (iii) the documents, records, logs
and other data maintained by the Borrower or applicable Helicopter Owning Subsidiary in
respect of such Mortgaged Helicopter, when such Mortgaged Helicopter is not subject to a
Lease, and (iv) all other records, logs and materials required by the FAA (or other Aviation
Authority chosen by the Borrower in accordance with terms of this Agreement);
“ Register ”
shall have the meaning ascribed thereto in Section 11;
“ Regulation T ”
means Regulation T of the Board of Governors of the Federal Reserve System, as in effect
from time to time;
“ Regulation U ”
means Regulation U of the Board of Governors of the Federal Reserve System, as in effect
from time to time;
“ Regulation X ”
means Regulation X of the Board of Governors of the Federal Reserve System, as in effect
from time to time;
“ Removable Part ”
shall have the meaning ascribed to such term in Section 10.2(c)(iii);
“ Replacement Airframe ”
means any airframe substituted for the Airframe pursuant to Section 10.2;
“ Replacement Engine ”
means an engine substituted for an Engine pursuant to Section 10.2;
“ Replacement Lender(s) ”
26
“ Required Balance ”
shall have the meaning set forth in Section 3.13;
“ Required Insurance ”
means insurance that satisfies the requirements set forth in Schedule E;
“ Revolving Credit Advance ”
means any amount advanced to the Borrower on any Drawdown Date pursuant to Section 3.2
which may be a Base Rate Advance or a LIBOR Advance;
“ SEACOR ”
means SEACOR Holdings Inc., a corporation incorporated under the laws of the State of
Delaware;
“ SEACOR Preferred Shares ”
shall have the meaning ascribed thereto in Section 10.1(a)(xxiv);
“ Section 1110 ”
means 11 U.S.C. Section 1110 of the Bankruptcy Code or any successor or analogous section
of the federal bankruptcy law in effect from time to time;
“ Secured Debt ”
means, for the Borrower, on a consolidated basis, the aggregate of any Indebtedness secured
or collateralized by a Lien;
“ Secured Funded Debt ”
means, for the Borrower, on a consolidated basis, the aggregate of any Funded Debt secured
or collateralized by a Lien;
“ Security Agreement ”
means the security agreement in favor of the Administrative Agent executed by the Grantors
defined therein with respect to its business assets and the Mortgaged Helicopters pursuant to
Section 4.1(b) substantially in the form set out in Exhibit 8;
“ Security Documents ”
means the Guaranty, the Pledge Agreement, the Security Agreement, the Mortgages, and the
Cash Collateral Agreement;
“ Security Party(ies) ”
means the Borrower and each of the Guarantors;
27
“ Services Agreement ”
means that certain services agreement to be entered into between the Borrower and SEACOR
pursuant to which SEACOR shall provide certain administrative and support services to the
Borrower at a cost to the Borrower of no more than US$500,000 per fiscal quarter, which
services agreement shall be acceptable to the Majority Lenders in form and substance, it being
understood that all amendments to the Services Agreement including, but not limited to,
changes in fees, require the prior written consent of the Administrative Agent;
“ Stated Amount ”
means with respect to each Letter of Credit, the maximum amount available to be drawn
thereunder (regardless of whether any conditions for drawing could then be met);
“ State of Registration ”
means, with respect to any Mortgaged Helicopter, the jurisdiction under the laws of which
such Mortgaged Helicopter is registered;
“ Subsidiaries ”
means the corporations or other entities listed on Schedule B (including, without limitation,
the Helicopter Owning Subsidiaries) of which the Borrower owns legally or beneficially
greater than fifty percent (50%) of the issued and outstanding stock or other interest in such
entity and has more than fifty percent (50%) of the total voting power of the voting stock or
other interest in such corporation or other entity, together with any other corporations or other
entities now or hereafter in existence of which the Borrower owns legally or beneficially
greater than fifty percent (50%) of the issued and outstanding stock or other interest in such
entity and has more than fifty percent (50%) of the total voting power of the voting stock or
other interest in such corporation or other entity, and each, a “Subsidiary”;
“ Subsidiary Funded Debt ”
means, as to each Subsidiary, the sum of (i) indebtedness for borrowed money, all obligations
evidenced by bonds, debentures, notes or similar instruments, and purchase money obligations
which, in accordance with GAAP, would be shown on the balance sheet of such Subsidiary as
a liability if a balance sheet were actually prepared in accordance with GAAP for such
Subsidiary, (ii) all obligations arising under letters of credit in respect of which such
Subsidiary is liable, (iii) all obligations as lessee under leases which have been, in accordance
with GAAP, recorded as capitalized lease obligations on the consolidated balance sheet of the
Borrower and would so
28
appear on such Subsidiary’s balance sheet if a balance sheet were prepared in accordance with
GAAP for such Subsidiary, (iv) Consolidated Subsidiary Guaranties and Non-Consolidated
Entity Guaranties, in each case, up to the maximum amount guaranteed under the terms of any
such guaranty but excluding indebtedness which is consolidated in the Borrower’s published
financial statements in accordance with GAAP and would so appear on such Subsidiary’s
balance sheet if a balance sheet were prepared in accordance with GAAP for such Subsidiary
but which represents a minority interest holders’ share of such indebtedness unless such
minority holders’ share has been guaranteed by such Subsidiary;
“ Swing Line Advance ”
means any amount advanced to the Borrower on any Drawdown Date pursuant to Section 3.3;
“ Swing Line Bank ”
“ Swing Line Commitment ”
means in relation to the Swing Line Bank, the amount set out opposite its name in Schedule A
hereto under the caption “Swing Line Commitment”, as the same may be reduced from time
to time as provided by Section 5.4;
“ Swing Line Facility ”
means at any time an amount equal to the lesser of (a) the amount of the Swing Line Bank’s
Swing Line Commitment at such time and (b) Twenty Five Million Dollars ($25,000,000);
“ Syndication Agent ”
“ Tangible Net Assets ”
shall mean, on a consolidated basis, (A) the consolidated assets of the Borrower determined in
accordance with GAAP, reduced by the sum of (1) the net book value of all assets that would
be classified as intangible under GAAP (including but not limited to, goodwill, organizational
expenses, trademarks, trade names, copyrights, patents, licenses, any rights in any thereof,
unamortized debt discount and expenses and other unamortized deferred charges and other
intangible items), and (2) any minority interests in consolidated subsidiaries held by a Person
other than the Borrower or a Guarantor minus (B) consolidated current liabilities of the
Borrower determined in accordance with GAAP;
29
“ Taxes ”
means any present or future income or other taxes, levies, duties, charges, fees, deductions or
withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed
by any taxing authority whatsoever, except for taxes on or measured by the overall net income
of the Lenders imposed by their respective jurisdiction of incorporation or domicile of the
lending office making the Advances or issuing any Letter of Credit or any governmental
subdivision or taxing authority of any thereof or by any other taxing authority having
jurisdiction over any Agent or Lender (unless such jurisdiction is asserted solely by reason of
the activities of the Borrower or any Subsidiary);
“ Termination Date ”
means the day falling five (5) years after the Closing Date or, if such day is not a Banking
Day, the next following Banking Day, unless such next following Banking Day falls in the
following month, in which case the Termination Date shall be the immediately preceding
Banking Day;
“ Termination Event ”
means (i) a “reportable event,” as defined in Section 4043 of ERISA, (ii) the withdrawal of
the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in
which it was a “substantial employer,” as defined in Section 4001(a)(2) of ERISA, or the
incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA
upon the termination of a Multiple Employer Plan, (iii) the filing of a notice of intent to
terminate a Plan or Multiple Employer Plan under Section 4041 of ERISA or the treatment of
a Multiemployer Plan amendment as a termination under Section 4041A of ERISA, (iv) the
institution of proceedings to terminate a Plan, a Multiple Employer Plan or a Multiemployer
Plan, (v) any other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any Plan,
Multiple Employer Plan or Multiemployer Plan, or (vi) termination of a Foreign Plan;
“ Tier 1 Jurisdictions ”
means the Acceptable Jurisdictions set forth in Schedule F and listed under the heading “Tier
1 Jurisdictions”;
30
“ Tier 2 Jurisdictions ”
means the Acceptable Jurisdictions set forth in Schedule F and listed under the heading “Tier
2 Jurisdictions”;
“ Tiers ”
means Tier 1 and Tier 2 and either of them;
“ Total Capitalization ”
means, on a consolidated basis, the aggregate of Funded Debt and Consolidated Net Worth;
“ Transferee ”
“ Underlying Subsidiary Funded Debt ”
means the outstanding principal amount of Subsidiary Funded Debt issued or incurred by an
Issuing Subsidiary;
“ U.S. Air Carrier ”
means any United States air carrier that is a Citizen of the United States holding an air carrier
operating certificate issued pursuant to chapter 447 of title 49 of the United States Code for
aircraft capable of carrying 10 or more individuals or 6000 pounds or more of cargo, and as to
which there is in force an air carrier operating certificate issued pursuant to Part 135 of the
FAA Regulations, or which may operate as an air carrier by certification or otherwise under
any successor or substitute provisions therefor or in the absence thereof;
“ U.S. Bancorp Helicopters ”
means the two Helicopters, each owned by Era Helicopters LLC, a Delaware limited liability
company and a wholly owned Subsidiary of the Borrower, which are subject to mortgages
granted by Era Helicopters Leasing in favor of U.S. Bancorp Equipment Finance, Inc.;
“ U.S. Government ”
means the federal government of the United States, or any instrumentality or agency thereof
the obligations of which are guaranteed by the full faith and credit of the federal government
of the United States; and
“ Withdrawal Liability(ies) ”
shall have the meaning given to such term under Part 1 of Subtitle E of Title IV of ERISA.
31
1.2. Computation of Time Periods; Other Definitional Provisions . In this Agreement, the Notes and the Security Documents, in the
computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to”
and “until” each mean “to but excluding”; words importing either gender include the other gender; references to “writing” include printing,
typing, lithography and other means of reproducing words in a tangible visible form; the words “including,” “includes” and “include” shall be
deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections), exhibits, annexes or
schedules are to this Agreement, the Notes or the Security Documents, as applicable; references to agreements and other contractual instruments
(including this Agreement, the Notes and the Security Documents) shall be deemed to include all subsequent amendments, amendments and
restatements, supplements, extensions, replacements and other modifications to such instruments (without, however, limiting any prohibition on
any such amendments, extensions and other modifications by the terms of this Agreement, the Notes or the Security Documents); references to
any matter that is “approved” or requires “approval” of a party shall mean approval given in the sole and absolute discretion of such party unless
otherwise specified; and words importing the plural include the singular and vice-versa.
1.3. Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted
accounting principles as in effect from time to time in the United States of America consistently applied (“GAAP”) and all financial statements
submitted pursuant to this Agreement shall be prepared in accordance with, and all financial data submitted pursuant hereto shall be derived
from financial statements prepared in accordance with, GAAP.
1.4. Certain Matters Regarding Materiality . To the extent that any representation, warranty, covenant or other undertaking of the Borrower
in this Agreement is qualified by reference to those which are not reasonably expected to result in a “Material Adverse Change” or language of
similar implication, no inference shall be drawn therefrom that any Agent or Lender has knowledge or approves of any noncompliance by the
Borrower with any governmental rule.
1.5. Forms of Documents . Except as otherwise expressly provided in this Agreement, references to documents or certificates
“substantially in the form” of Exhibits to another document shall mean that such documents or certificates are duly completed in the form of the
related Exhibits with substantive changes subject to the provisions of Section 18.5 of this Agreement.
1.6. Headings . In this Agreement, section headings are inserted for convenience of reference only and shall not be taken into account in
the interpretation hereof.
32
SECTION 2. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties . In order to induce the Agents and the Lenders to enter into this Agreement and to induce the Lenders
to make the Advances and to issue and/or participate in Letters of Credit as provided for herein, each of the Security Parties hereby represents
and warrants to the Agents and the Lenders (which representations and warranties shall survive the execution and delivery of this Agreement and
the Notes and the making of the Advances and the issuance of Letters of Credit) that:
(a) Due Organization and Power . (i) The Borrower and each of the Subsidiaries are duly formed and are validly existing in good
standing under the laws of their respective jurisdictions of incorporation, have duly qualified and are authorized to do business as a foreign
corporation in each jurisdiction wherein the nature of the business transacted thereby makes such qualification necessary, have full power
to carry on their respective businesses as now being conducted and, in the case of the Security Parties, to enter into and perform their
respective obligations under each of this Agreement, the Notes and the Security Documents, and have complied with all statutory,
regulatory and other requirements relative to such businesses and such agreements the noncompliance with which could reasonably be
expected to give rise to a Material Adverse Change;
(ii) Set forth on Schedule B hereto is a complete and accurate list of all Subsidiaries of the Borrower, showing as of the date
hereof (as to each such Subsidiary) the jurisdiction of its incorporation and the percentage ownership interest of the Borrower in such
Subsidiary. All of the outstanding Equity Interests in the Borrower’s Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Borrower or one or more of its Subsidiaries free and clear of all Liens, except those created under
the Security Documents;
(b) Authorization and Consents . All necessary corporate action has been taken to authorize, and all necessary consents and
authorizations have been obtained and remain in full force and effect to permit, each of the Security Parties to enter into and perform its
respective obligations under each of this Agreement, the Notes and the Security Documents and to permit the Borrower to borrow, service
and repay the Advances and no further consents or authorizations are necessary for the service and repayment of the Advances or any part
of any thereof;
(c) Binding Obligations . Each of this Agreement, the Notes and the Security Documents constitutes legal, valid and binding
obligations of the Security Parties as are party thereto, enforceable against the Security Parties as are party thereto in accordance with its
terms, except to the extent that such enforcement may be limited by equitable principles or applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights;
(d) No Violation . The execution, delivery and performance by the Security Parties of this Agreement, the Notes and the Security
Documents to which it is or is to be a party are within the Security Parties’ corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene such Security Party’s charter or bylaws, (ii) violate any law, rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any
agreement respecting Indebtedness, any contract of employment relating to any of the Mortgaged Helicopters, or any other contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Security Party, any of their respective
Subsidiaries or any of their properties or (iv) except for the Liens created under this Agreement and the Security Documents, result in or
require the creation or imposition of any Lien upon or with respect to any Collateral;
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(e) Filings; Stamp Taxes . It is not necessary to ensure the legality, validity, enforceability or admissibility in evidence in the United
States of the Security Documents that any of them or any other instrument be filed, recorded, registered or enrolled in any court, public
office or elsewhere in the United States, except as expressly provided herein, or that any stamp, registration or similar tax be paid in the
United States on or in relation to any of the Security Documents, and no further action in the United States, including any filing or
recording of any document, is necessary or permissible to establish and perfect the Administrative Agent’s security interest in the
Mortgaged Helicopters and the other Collateral as against the Borrower, any Eligible Lessee (if applicable) and any third parties except for
(i) any Mortgage Filing and the registration of the Mortgage with the FAA, (ii) the filing of financing statements and amendments thereto
under the Uniform Commercial Code in Delaware and (iii) the registering of (A) the International Interest of each Mortgage with respect to
each Mortgaged Helicopter and (B) the prospective assignment of the Borrower’s associated rights (if any) in any Eligible Lease (if
applicable) with the International Registry;
(f) Filings; Perfection .
(i) All filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral created under
the Security Documents have been duly made or taken and are in full force and effect, and the Security Documents create in favor of
the Administrative Agent for the benefit of the Creditors a valid and, together with such filings and other actions, perfected first
priority security interest in the Collateral, securing the payment of the obligations under this Agreement and the Security Documents,
and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. The Security
Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests
created or permitted under this Agreement and the Security Documents;
(ii) (A) Each of the Helicopter Owning Subsidiaries is or will be a “transacting user entity” (as such term is defined in the
Regulations of the International Registry); is “situated”, for purposes of the Cape Town Treaty, in the United States; and has the
power to “dispose” (as such term is used in the Cape Town Treaty) of the Mortgaged Helicopters owned by it on each Drawdown
Date; (B) each Mortgaged Helicopter is an “aircraft object” (as defined in the Cape Town Treaty); (C) the United States is a
Contracting State under the Cape Town Treaty and any other applicable State of Registration will be a Contracting State under the
Cape Town Treaty; (D) each Mortgage shall convey an International Interest in each Mortgaged Helicopter; and (E) the payment of
principal and interest on the Advances, and the performance by the Borrower of its obligations under this Agreement and the other
Security Documents, are “associated rights” (as defined in the Cape Town Treaty). Notwithstanding the foregoing, any Helicopter
Owning Subsidiary that is in an Acceptable Jurisdiction, but is not subject to the Cape Town Treaty, is required to be in compliance
with all Applicable Laws;
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(g) Business and Property . Neither the business nor the properties of any Security Party or any of its Subsidiaries are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that could be reasonably likely to result in a Material Adverse Change;
(h) Litigation . Except as disclosed in filings by the Borrower with the United States Securities and Exchange Commission prior to
the Drawdown Date of any Advance, there is no action, suit, investigation, litigation, arbitration, or proceeding affecting any Security Party
or any Mortgaged Helicopter, including any Environmental Claim, pending or threatened before any before any court, board of arbitration
or administrative agency that (i) would constitute a Material Adverse Change or (ii) purports to affect the legality, validity or enforceability
of the Agreement, the Notes or any Security Document or the consummation of the transactions contemplated by the Agreement, the Notes
or any Security Document or (iii) relates to any material contract of employment relating to any Mortgaged Helicopter;
(i) No Default . Neither the Borrower nor any of the Subsidiaries are in default under any agreement by which any thereof is bound,
nor are any thereof in default in respect of any financial commitment or obligation, where such default could result in any Material
Adverse Change;
(j) Mortgaged Helicopters . Set forth on Schedule B hereto is a complete and accurate list of all Mortgaged Helicopters (including
their respective Engines) owned by the Borrower and, as applicable, each of the Helicopter Owning Subsidiaries as of the date hereof and
to be subject to a Mortgage on the initial Drawdown Date; each such Mortgaged Helicopter is duly registered with the FAA in the name of
the Borrower or one of the Helicopter Owning Subsidiaries under the laws of the United States, with such Mortgaged Helicopter eligible to
operate in the United States; each such Mortgaged Helicopter is deployed as indicated in Schedule B hereto. Each of the Helicopter
Owning Subsidiaries that owns a Mortgaged Helicopter is eligible to own and operate such Mortgaged Helicopter in the jurisdiction and
trade in which such Mortgaged Helicopter is qualified;
(k) Helicopter Ownership, Classification, and Insurance .
(i) Each of the Mortgaged Helicopters is owned by the Borrower or a Helicopter Owning Subsidiary free and clear of all Liens
and encumbrances other than Permitted Liens and is duly registered under the laws of an Acceptable Jurisdiction in the name of
Borrower or such Helicopter Owning Subsidiary, as owner, or in the name of an Eligible Lessee, as operator under an Eligible Lease;
(ii) Each of the Mortgaged Helicopters has been maintained in accordance with the standards set forth in this Agreement; and
(iii) Each of the Mortgaged Helicopters is insured in accordance with the Required Insurance;
(l) Financial Statements . All financial statements, information and other data furnished by the Borrower to the Lenders are complete
and correct, and such financial statements have been prepared in accordance with GAAP and accurately and fairly present the financial
condition of the parties covered thereby as of the respective dates thereof and the results of the
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operations thereof for the period or respective periods covered by such financial statements. Since such date or dates there has been no
Material Adverse Change and neither the Borrower nor any of the Subsidiaries have any contingent obligations, liabilities for taxes or other
outstanding financial obligations which on a consolidated basis are material in the aggregate, except as disclosed in such statements,
information and data;
(m) Tax Returns and Payments . The Borrower and each of the Subsidiaries have filed all tax returns required to be filed thereby and
have paid all taxes payable thereby which have become due, other than those not yet delinquent or the non-payment of which would not
give rise to a Material Adverse Change and except for those taxes being contested in good faith and by appropriate proceedings or other
acts and for which adequate reserves have been set aside on the books thereof;
(n) Insurance . Each of the Borrower and the Subsidiaries have insured their respective properties, assets and businesses against such
risks and in such amounts as are required by law and as are customary for comparable companies engaged in similar businesses;
(o) Chief Executive Office . The chief executive office and chief place of business of each Security Party is, and will continue to be,
located at 600 Airport Service Road, Lake Charles, Louisiana 70605, except for Era FBO LLC which is located at 6160 Carl Brady Drive,
Ted Stevens Anchorage Alaska International Airport, Anchorage, AK 99502;
(p) Solvency . On the date of the making of each Advance and both immediately before and immediately after giving effect to all the
transactions contemplated by this Agreement and the other documents referred to herein to occur on the date of the making of each
Advance and as of the date hereof, (i) the sum of the Borrower’s property (on a consolidated basis), at a fair valuation, does and will
exceed its liabilities (on a consolidated basis), including contingent liabilities, (ii) the present fair salable value of the Borrower’s assets (on
a consolidated basis) is not and shall not be less than the amount that will be required to pay the Borrower’s probable liability on its then
existing debts (on a consolidated basis), including contingent liabilities, as they mature, (iii) the Borrower (on a consolidated basis) does
not and will not have unreasonably small capital with which to continue its business, and (iv) the Borrower (on a consolidated basis) has
not incurred, does not intend to incur and does not believe it will incur debts beyond its ability to pay such debts as they mature;
(q) Environmental Matters . Except as disclosed prior to the date of this Agreement in writing to the Lenders (i) the Borrower and
each of the Subsidiaries are now and will continue to be, to the extent required, in compliance with all applicable United States federal and
state, local, foreign and international laws, regulations, conventions and agreements relating to pollution prevention or protection of human
health or the environment (including, without limitation, ambient air, surface water, ground water, navigable waters, waters of the
contiguous zone, ocean waters and international waters), including, without limitation, laws, regulations, conventions and agreements
relating to (1) emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous materials, oil, hazardous substances, petroleum and petroleum products and by-products (“Materials of Environmental
Concern”), or (2) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (“Environmental Laws”) (except, as to all of the above, where the failure to do so would not be reasonably likely
to result in a Material
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Adverse Change); (ii) the Borrower and each of the Subsidiaries now have and will continue to have, to the extent required, all permits,
licenses, approvals, rulings, variances, exemptions, clearances, consents or other authorizations required under applicable Environmental
Laws (“Environmental Approvals”) and are now and will continue to be, to the extent required, in compliance with all Environmental
Approvals required to operate their respective businesses as then being conducted (except where the failure to comply with, obtain or
renew such permits, licenses, rulings, variances, exemptions, clearances, consents or other authorizations would not be reasonably likely to
result in a Material Adverse Change); and (iii) neither the Borrower nor any of the Subsidiaries have received any notice of any claim,
action, cause of action, investigation or demand by any Person, entity, enterprise or government, or any political subdivision,
intergovernmental body or agency, department or instrumentality thereof, alleging potential liability which would reasonably be likely to
result in a Material Adverse Change, or a requirement to incur, any investigatory costs, cleanup costs, response and/or remedial costs
(whether incurred by a governmental entity or otherwise), natural resources, property and/or personal injury damages, attorneys’ fees and
expenses, or fines or penalties, in each case arising out of, based on or resulting from (1) the presence, or release or threat of release into
the environment, of any Materials of Environmental Concern at any location, whether or not owned by the Borrower or any of the
Subsidiaries, or (2) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Environmental
Approval (“Environmental Claim”) (other than Environmental Claims that have been fully and finally adjudicated or otherwise determined
and all fines, penalties and other costs, if any, payable by the Borrower or any of the Subsidiaries in respect thereof have been paid in full
or which are fully covered by insurance (including permitted deductibles)), if such costs, damages, fees, expenses, fines and/or penalties on
a consolidated basis are material in the aggregate;
(r) Liens . Other than as disclosed on Schedule C and Permitted Liens, there are no Liens in respect of Secured Debt on any property
owned by the Borrower or any Subsidiary of the Borrower;
(s) Indebtedness . Other than as disclosed in Schedule D, neither the Borrower nor any of the Subsidiaries has any Indebtedness;
(t) Payment Free of Taxes . All payments made or to be made by the Security Parties under or pursuant to this Agreement, the Notes
and the Security Documents shall be made free and clear of, and without deduction or withholding for an account of, any Taxes;
(u) ERISA . The execution and delivery of this Agreement and the consummation of the transactions hereunder will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code and no condition exists or event or transaction has
occurred in connection with any Plan, Multiple Employer Plan, Multiemployer Plan or Foreign Plan resulting from the failure of any
thereof to comply with ERISA or similar law which is reasonably likely to result in the Borrower, any member of the ERISA Group or any
ERISA Affiliate incurring any liability, fine or penalty which individually or in the aggregate could result in a Material Adverse Change.
Neither the Borrower nor any member of the ERISA Group nor any ERISA Affiliate, individually or collectively, has incurred, or
reasonably expects to incur, Withdrawal Liabilities or liabilities upon the happening of a Termination Event the aggregate of which for all
such Withdrawal Liabilities and other liabilities exceeds or would exceed $10,000,000. With respect to any Multiemployer Plan, Multiple
Employer Plan, Plan or Foreign
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Plan, neither the Borrower nor any member of the ERISA Group nor any ERISA Affiliate is aware of or has been notified that any
“variance” from the “minimum funding standard” has been requested (each such term as defined in Part 3, Subtitle B, of Title I of ERISA)
or is aware of or has been notified of any similar request with regard to a Foreign Plan. Neither the Borrower nor any member of the
ERISA Group nor any ERISA Affiliate has received any notice that any Multiemployer Plan is in reorganization, within the meaning of
Title IV of ERISA;
(v) Foreign Trade Control Regulations . None of the transactions contemplated herein will violate the provisions of any statute,
regulation or resolution enacted by the United States of America, any other nation or group of nations, or the United Nations to prohibit or
limit economic transactions with certain foreign Persons including, but not limited to, the Comprehensive Iran Sanctions, Accountability
and Divestment Act of 2010 and any of the provisions, without limitation, of the Foreign Assets Control Regulations of the United States
of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, et seq., as amended);
(w) No Proceedings to Dissolve . There are no proceedings or actions pending or contemplated by any Security Party or, to the best
knowledge of any Security Party, contemplated by any third party, to dissolve or terminate any Security Party;
(x) Compliance with Laws . Each of the Security Parties is in compliance with all applicable laws, except where any failure to
comply with any such applicable laws would not, alone or in the aggregate, result in a Material Adverse Change;
(y) No Margin Stock . None of the Security Parties is engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock;
(z) No “Investment Company” . Neither any Security Party nor any of its Subsidiaries is an “investment company”, or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company
Act of 1940, as amended. Neither any Security Party nor any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a
“holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any
Letters of Credit, nor the application of the proceeds or repayment thereof by the Security Parties, nor the consummation of the other
transactions contemplated by this Agreement or the Security Documents, will violate any provision of either Act or any rule, regulation or
order of the Securities and Exchange Commission thereunder;
(aa) Lawful Purposes/Ultimate Beneficiary . The Borrower requires the Credit Facility for use in connection with its lawful corporate
purpose and for no other purposes and the Borrower’s use of the Credit Facility does not contravene any law, official requirement or other
regulatory measure or procedure applicable to the Borrower implemented to combat “money laundering” (as defined in Article 1 of the
Directive (2005/60/EC) of the Council of the European Communities) and comparable United States Federal and state laws. The Borrower
represents that it is the ultimate beneficiary of the Credit Facility contemplated in this Agreement and will promptly notify the Lenders (by
written notice to the Administrative Agent) if it ceases to be the ultimate beneficiary. Such written notice shall disclose the name and the
address of the new ultimate beneficiary;
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(bb) No Untrue Statements . No written information, other than information related to general economic and industry conditions,
furnished by or on behalf of any Security Party to the Administrative Agent or any other Creditor in connection with the negotiation and
syndication of this Agreement, the Notes and the Security Documents or pursuant to the terms of this Agreement, the Notes and the
Security Documents contained or will contain as of the date made any untrue statement of a material fact or omitted or will omit to state a
material fact, when taken as a whole, necessary to make the statements made therein not misleading;
(cc) Pari Passu . This Agreement and the Facility and the obligations of the Borrower and the other Security Parties hereunder and
under this Agreement, the Notes and the Security Documents shall rank at least pari passu in right of payment with all other present and
future unsecured Indebtedness of the Borrower and such other Security Parties (except for mandatory obligations preferred by law);
(dd) Good Title . Each Security Party has good and marketable title to its personal property and assets (including any Helicopter
owned or to be owned by such Security Party and related Collateral) free and clear of all Liens and encumbrances, in each case, other than
Permitted Liens;
(ee) Proceeds . The proceeds of the Advances will be used only as set forth in Section 3.1 hereof;
(ff) No Money Laundering . In relation to the terms of this Agreement, Notes and the Security Documents and the performance and
discharge of its obligations and liabilities under this Agreement, the Notes and the Security Document and the transactions contemplated
thereby, each of the Borrower and the other Security Parties is acting for its own account, and the foregoing will not involve or lead to a
contravention of any law, official requirement or other regulatory measure or procedure which has been implemented to combat money
laundering, including but not limited to such law, official requirement or other regulatory measure or procedure under the Patriot Act (as
defined in Section 18.6 hereof), any European Union law, or other applicable law;
(gg) Operating Certificate . Each of the Helicopter Owning Subsidiaries (other than Era Leasing LLC and Era Med LLC) holds an air
carrier operating certificate issued pursuant to Chapter 447 of Title 49, United States Code, for aircraft capable of carrying ten (10) or more
individuals or 6,000 pounds or more of cargo; and
(hh) Survival . All representations, covenants and warranties made herein and in any certificate or other document delivered pursuant
hereto or in connection herewith shall survive the making of the Credit Facility and the issuance of the Notes.
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SECTION 3. ADVANCES OF THE FACILITY/LETTERS OF CREDIT
3.1. Purpose . The Lenders have severally agreed to make the Initial Commitment under the Credit Facility available for general corporate
purposes of the Borrower. Upon the prior written request of the Borrower to the Administrative Agent, such request to be delivered no later than
fifteen (15) days prior to the proposed date of a Commitment Increase, the Initial Commitment under the Credit Facility may be increased by the
Commitment Increase, provided that (a) at the time of making such request, there exists no Material Adverse Change or Event of Default and
that such increase in the Committed Amount would not result in a Material Adverse Change or Event of Default, (b) the existing Lenders at the
time of the making of such request or any new Lender who has become a party hereto in accordance with Section 11 hereof, agree to make the
Commitment Increase or a portion thereof available, it being understood no existing Lender is obligated to increase its Commitment hereunder,
and (c) any such increase in the Committed Amount shall be in minimum increments of Fifty Million Dollars ($50,000,000). The Commitment
Increase, if made available, shall be made available for general corporate purposes of the Borrower.
3.2. Revolving Credit Advances . Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby
agrees with the Borrower that, subject to the terms of this Agreement, it will on the Drawdown Dates make its portion of each Revolving Credit
Advance ( pro rata in proportion to its Commitment), as requested by the Borrower, available through the Administrative Agent to the Borrower
in an aggregate amount not to exceed at any one time outstanding the then available Committed Amount, provided , however , that no Revolving
Credit Advances shall be made one month prior to the Termination Date. The initial Revolving Credit Advance shall be in an amount (in an
integral multiple of One Million Dollars ($1,000,000)) equal to or exceeding Five Million Dollars ($5,000,000) and each subsequent Revolving
Credit Advance shall be in an amount (in an integral multiple of One Million Dollars ($1,000,000)) equal to or exceeding One Million Dollars
($1,000,000). Each Revolving Credit Advance shall be repaid in full, as more fully set forth hereinafter, not later than the Termination Date. Not
more than fifteen (15) Revolving Credit Advances may be made in any consecutive twelve (12) month period. Within the limits of this
Section 3.2 and upon the conditions herein provided, the Borrower may from time to time borrow pursuant to this Section 3.2, repay Revolving
Credit Advances pursuant to Section 5 and reborrow pursuant to this Section 3.2. In addition, on three (3) Banking Days prior written notice to
the Administrative Agent (which shall promptly furnish a copy to each Lender) the Borrower may convert (x) a LIBOR Advnce to a Base Rate
Advance at the end of an Interest Period or (y) a Base Rate Advance to a LIBOR Advance. The obligation of each Lender to advance its
respective portion of any Revolving Credit Advance shall be several and not joint with the other Lenders. With respect to each Revolving Credit
Advance, no Lender shall be obliged to advance to the Borrower (a) with respect to each Revolving Credit Advance, an amount in excess of such
Lender’s pro rata share of such Revolving Credit Advance and, (b) when aggregated with all other Advances and Letters of Credit outstanding
at any time, an amount in excess of its Commitment.
3.3. Swing Line Advances . The Swing Line Bank, relying upon each of the representations and warranties set out in Section 2, hereby
agrees with the Borrower that, subject to the terms of this Agreement, it will on the Drawdown Dates make a Swing Line Advance, as requested
by the Borrower, available to the Borrower (i) in an aggregate amount not to exceed at any one time outstanding the lesser of (x) the Swing Line
Facility at such time and (y) the Swing Line Bank’s Swing Line Commitment at such time and (ii) in an amount not to exceed at any one time
outstanding the then available Committed Amount. No Swing Line Advance shall be used for the purpose of funding the payment of principal of
any other Swing Line Advance. Each Swing
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Line Advance shall be in an amount of One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000)
in excess thereof and shall be made at the Base Rate together with the Applicable Margin. Within the limits of this Section 3.3 and upon the
conditions herein provided, the Borrower may from time to time borrow pursuant to this Section 3.3, repay Swing Line Advances pursuant to
Section 5 and reborrow pursuant to this Section 3.3. Immediately upon the making of a Swing Line Advance, each of the Lenders shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Bank a risk participation in such Swing Line
Advance in an amount equal to the product of such Lender’s pro rata shares times the amount of such Swing Line Advance.
3.4. Availability Generally . The availability of the Advances to be made on the Drawdown Dates is subject to (i) the satisfaction of the
applicable conditions precedent in accordance with the terms of Sections 4.1 and 4.2 and (ii) other than with respect to Swing Line Advances,
such Advance being requested to be made on or prior to one (1) month before the Termination Date.
3.5. Revolving Credit Advance Drawdown Notice . The Borrower shall give written notice of each Revolving Credit Advance (x) prior to
11 a.m. (New York time) the day prior to the Drawdown Date of each Base Rate Advance and (y) prior to 11 a.m. (New York time),on the third
(3 rd ) Banking Day prior to the Drawdown Date of a LIBOR Advance (other than a Drawdown Date occurring by reason of a drawing under any
Letter of Credit), serve a notice (a “ Drawdown Notice ”) on the Administrative Agent (which shall promptly furnish a copy to each Lender),
substantially in the form set out in Exhibit 2, which notice shall (a) be in writing addressed to the Administrative Agent, (b) be effective on
receipt by the Administrative Agent, provided it is received before 11 a.m., New York time, (otherwise it shall be deemed to have been received
on the next Banking Day), (c) specify whether the requested Advance is to be a Base Rate Advance or a LIBOR Advance, (d) specify the amount
and purpose of the Advance to be drawn, (e) specify the Banking Day on which the Advance is to be drawn and the initial Interest Period,
(f) specify the disbursement instructions and (g) be irrevocable. Each Lender shall, before 3:00 p.m. (New York City time) on the Drawdown
Date make available for the its to the Administrative Agent to the account designated by the Administrative Agent, in same day funds, such
Lender’s ratable portion of such Advance. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable
conditions set forth herein, the Administrative Agent will make such funds available to the Borrower; provided, however, that the Administrative
Agent shall first make a portion of such funds equal to the aggregate principal amount of any Advances made by an Issuing Bank under any
Letter of Credit, or, in either case, by any other Lender and outstanding on the such Drawdown Date, plus interest accrued and unpaid thereon to
and as of such date, available to the Issuing Bank, as the case may be, and, in either case, such other Lenders for repayment of such Letter of
Credit Advances. Unless the Administrative Agent shall have received notice from a Lender prior to any Drawdown Date that such Lender will
not make available to the Administrative Agent such Lender’s ratable portion of such Advance, the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent on such Drawdown Date herewith and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall
not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such
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amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to Advances comprising such Advance and (ii) in the case of such Lender, the Federal Funds Effective Rate. If
such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Advance
as part of such Borrowing for purposes of this Agreement.
3.6. Swing Line Advance Drawdown Notice . (a) The Borrower shall, not later than 11 a.m. (New York time) on the date of the proposed
Swing Line Advance, serve a Drawdown Notice on the Swing Line Bank, copied to the Administrative Agent, which notice shall (a) be in
writing addressed to the Swing Line Bank, (b) be effective on receipt by the Swing Line Bank, provided it is received before 11 a.m. (New York
time) (otherwise it shall be deemed to have been received on the next Banking Day), (c) specify the amount and purpose of the Swing Line
Advance to be drawn, (d) specify the initial Interest Period, (e) specify the disbursement instructions and (f) be irrevocable.
(b) The Swing Line Bank shall, on the date of each Swing Line Advance, give each Lender written notice of the making of the Swing
Line Advance.
3.7. Drawdown Notice a Warranty . Each Drawdown Notice shall be deemed to constitute a warranty by the Borrower (a) that the
representations and warranties stated in Section 2 are true and correct on the date of such Drawdown Notice and will be true and correct on the
Drawdown Date as if made on such date, (b) that after giving effect to the borrowing made pursuant to such Drawdown Notice, the Credit
Facility Balance shall not exceed the Committed Amount then available hereunder pursuant to Sections 3.2 and 3.3 and (c) that no Event of
Default nor any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default has occurred and is
continuing.
3.8. Notation of Advance on Note . Each Advance, or pro rata portion thereof, made by a Lender to the Borrower may be evidenced by a
notation of the same made by such Lender on the grid attached to such Lender’s Note, which notation, absent manifest error, shall be prima facie
evidence of the amount of the relevant Advance.
3.9. Letters of Credit . (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that a Letter of Credit
Issuer at any time and from time to time prior to the Banking Day immediately preceding the Termination Date issue, for the account of the
Borrower and in support of the L/C Supportable Obligations, and subject to and upon the terms and conditions herein set forth, and such Letter
of Credit Issuer agrees to issue from time to time, irrevocable standby letters of credit denominated in Dollars and in such form as may be
approved by the Letter of Credit Issuer (singly, a “Letter of Credit” and collectively, the “Letters of Credit”).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued, the Stated Amount of which, (x) when added to the Letter
of Credit Outstandings at such time, would exceed the Letter of Credit Limit or (y) when added to the Letter of Credit Outstandings at such
time plus the aggregate principal amount of all Advances made by Lenders then outstanding would exceed the Committed Amount at such
time; and (ii) each Letter of Credit shall have an expiry date occurring not later than the earlier of (x) the date which occurs thirty-six
(36) months after the date of issuance thereof and (y) the Banking Day immediately preceding the Termination Date;
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provided that the Borrower may request, and the Letter of Credit Issuers, the Administrative Agent and the Lenders may consent, in their
respective absolute discretion, to extend the expiry dates of certain Letters of Credit beyond the Termination Date (singly, an “Extended
Letter of Credit” and collectively, the “Extended Letters of Credit”). Should one or more Lenders not consent to the requested extension,
the Borrower may request and the applicable Letter of Credit Issuer, the Administrative Agent and the remaining Lenders may agree to
provide such Extended Letter of Credit and in such case and for such purpose, the Commitments of the Lenders will be adjusted
accordingly.
3.10. Request for Issuance of Letter of Credit . (a) Whenever the Borrower wishes that a Letter of Credit be issued, the Borrower shall give
the applicable Letter of Credit Issuer written notice (a “ Letter of Credit Request ”), copied to the Administrative Agent, substantially in the form
of Exhibit 3 prior to 11:00 a.m. (New York time) at least three (3) Banking Days prior to the proposed date of issuance (which shall be a
Banking Day), which Letter of Credit Request shall include any documents that the Letter of Credit Issuer may reasonably require in connection
therewith. The Letter of Credit Request shall be irrevocable. The Letter of Credit Issuer shall promptly notify each Lender of each Letter of
Credit Request.
(b) The Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it, give each Lender and the Borrower
written notice of the issuance of such Letter of Credit.
3.11. Letter of Credit Payments Deemed Advances . (a) The Borrower hereby agrees that any payment or disbursement made by a Letter of
Credit Issuer under any Letter of Credit shall be deemed an Advance and shall bear interest for each day from the date of such payment or
disbursement at the Base Rate together with the Applicable Margin as in effect on each day until the date falling three (3) Banking Days after
receipt by the Administrative Agent of an Interest Notice with respect to such Advance and shall thereafter bear interest at the Applicable Rate.
The applicable Letter of Credit Issuer shall give prompt notice to the Borrower and the Lenders of each payment or disbursement and the amount
thereof under a Letter of Credit.
(b) (i) The Letter of Credit Issuers shall not concern themselves with the regularity or propriety of any demand made under any Letter
of Credit beyond the face thereof, provided that such demand strictly complies with the terms of such Letter of Credit and (subject to the
preceding proviso) it shall not be a defense to a claim of the Letter of Credit Issuers that the Letter of Credit Issuers could have resisted the
payment in respect of which such claim is made.
(ii) The Borrower’s obligation to repay any Advance deemed made under this Section 3.11 (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense
to payment which the Borrower may have or have had against any Letter of Credit Issuer or any Lender, including, without
limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit
(other than the failure of the Letter of Credit Issuer to determine that any documents required to be delivered under such Letter of
Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit) or any non-application
or misapplication by the beneficiary of the proceeds of such drawing; provided , however , that the Borrower shall not be obligated to
reimburse any Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer.
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3.12. Letter of Credit Participation . (a) Immediately upon the issuance by a Letter of Credit Issuer of such Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each Lender, and each Lender (each a “Letter of Credit Participant”) shall be
deemed irrevocably and unconditionally to have purchased and received from the Letter of Credit Issuer, without recourse or warranty, an
undivided interest and participation, in proportion to such Lender’s Commitment, in such Letter of Credit, each substitute letter of credit, each
drawing made thereunder and the obligation of the Borrower under this Agreement with respect thereto (although the Letter of Credit Fee shall
be payable directly to the Administrative Agent for the account of the Letter of Credit Participants as provided in Section 14.2) and any security
therefor or guaranty pertaining thereto; provided , however , that for purposes of an Extended Letter of Credit, a Lender that did not consent to
an Extended Letter of Credit shall not be deemed to be a Letter of Credit Participant in such Extended Letter of Credit.
(b) In determining whether to pay under any Letter of Credit, a Letter of Credit Issuer shall not have any obligation relative to the
respective Letter of Credit Participants other than to determine that any documents required to be delivered under such Letter of Credit
have been delivered and that they comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be
taken by a Letter of Credit Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability to the respective Letter of Credit Participants.
(c) In the event that any Letter of Credit Issuer makes any payment under any Letter of Credit issued thereby, upon receipt of notice
thereof as provided in Section 3.11(a), each Letter of Credit Participant shall promptly and unconditionally pay to such Letter of Credit
Issuer, the amount of such Letter of Credit Participant’s Percentage of such payment in Dollars and in same day funds; provided ,
however , that no Letter of Credit Participant shall be obligated to pay to a Letter of Credit Issuer its percentage of such payment for any
wrongful payment made by such Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Letter of Credit Issuer. If a Letter of Credit Issuer so notifies any Letter of Credit
Participant required to fund a drawing under a Letter of Credit prior to 11:00 a.m. (New York time) on any Banking Day, such Letter of
Credit Participant shall make available to the Letter of Credit Issuer such Letter of Credit Participant’s Percentage of the amount of such
payment on such Banking Day in same day funds. If and to the extent such Letter of Credit Participant shall not have so made its
percentage of the amount of such drawing available to the Letter of Credit Issuer, such Letter of Credit Participant agrees to pay to the
Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such
amount is paid to the Letter of Credit Issuer at the overnight Federal Funds Effective Rate. The failure of any Letter of Credit Participant to
make available to a Letter of Credit Issuer its percentage of any drawing under any Letter of Credit shall not relieve any other Letter of
Credit Participant of its obligation hereunder to make available to such Letter of Credit Issuer its percentage of any payment under any
Letter of Credit on the date required, as specified above, but no Letter of Credit Participant shall be responsible for the failure of any other
Letter of Credit Participant to make available to such Letter of Credit Issuer such other Letter of Credit Participant’s Percentage of any
such payment.
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(d) The obligation of the respective Letter of Credit Participants to make payments to the applicable Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or
exception whatsoever (provided that no Letter of Credit Participant shall be required to make payments resulting from the Letter of Credit
Issuer’s gross negligence or willful misconduct) and shall be made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement;
(ii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or any person for whom any such transferee may be acting), any
Creditor or other person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter
of Credit);
(iii) any draft, certificate or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect; or
(iv) the occurrence of any Event of Default.
3.13. Collateral Account . (a) No later than ninety (90) days before the Termination Date, the Borrower hereby agrees to deposit an amount
equal to the aggregate amount available at such time to be drawn under the Extended Letters of Credit upon which a demand can be made (such
aggregate amount as determined from time to time being the “Required Balance”) in a cash collateral account to be established and maintained
by the Administrative Agent pursuant to a Cash Collateral Agreement over which the Administrative Agent shall have sole dominion and control
(the “L/C Cash Collateral Account”) upon terms substantially set forth in such Cash Collateral Agreement. The Administrative Agent shall, at
the Borrower’s direction and without assuming any risk of loss thereof, invest the funds in the L/C Cash Collateral Account in Cash Equivalents
for the account of the Borrower. All interest and other investment gains earned on such investments shall be added to the L/C Cash Collateral
Account as additional collateral security for the prompt and complete payment when due of the obligations and liabilities of the Borrower under
and in respect of the Letters of Credit. On (i) the last Banking Day of each calendar month, the Administrative Agent or (ii) any other date that
the Borrower, the Administrative Agent or Majority Lenders through the Administrative Agent shall in writing request, the Administrative Agent
shall determine whether the amount on deposit on such date in the L/C Cash Collateral Account (A) is greater than the Required Balance on such
date (the amount of such excess being the “Excess Amount”) or (B) is less than the Required Balance on such date (the amount of such deficit
being the “Deficit Amount”). The Administrative Agent shall advise the Borrower on the date of determination of the existence, if any, of any
Excess Amount or Deficit Amount and thereafter (i) the Borrower shall immediately upon receipt of notice from the Administrative Agent of the
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existence of any Deficit Amount, pay to the Collateral Agent (as defined in the Cash Collateral Agreement), as additional funds to be deposited
and held in such cash collateral account, an amount equal to such Deficit Amount or (ii) upon request of the Borrower within 5 Banking Days of
receipt of notice from the Administrative Agent of the existence of any Excess Amount, the Administrative Agent shall instruct such Collateral
Agent to release to the Borrower from the funds on deposit in the L/C Cash Collateral Account an amount equal to such Excess Amount. If at
any time the Administrative Agent or such Collateral Agent determines that any funds held in the L/C Cash Collateral Account are subject to any
right or claim of any Person other than such Collateral Agent, any Creditor, or the Letter of Credit Issuer, which right or claim could reasonably
have the effect of reducing the value of such funds to the Lenders and the Letter of Credit Issuer, the Borrower will, forthwith upon receipt of a
demand by the Administrative Agent, pay to the Collateral Agent, as additional funds to be deposited and held in such L/C Cash Collateral
Account, an amount equal to the amount by which the value of such funds to the Lenders and the Letter of Credit Issuer has been reduced as
determined by the Administrative Agent.
(b) The Borrower hereby grants a security interest in any amounts from time to time on deposit in the L/C Cash Collateral Account as
collateral security for the prompt and complete payment when due of the obligations and liabilities of the Borrower under and in respect of
the Extended Letters of Credit.
(c) The Borrower, the Administrative Agent, each other Creditor, and the Letter of Credit Issuers agree that any action taken or
omitted to be taken by the Administrative Agent in connection with the L/C Cash Collateral Account in accordance with the terms of this
Agreement, if taken or omitted to be taken in good faith and with reasonable care, shall be binding upon the Borrower, each other Creditor,
and the applicable Letter of Credit Issuers and shall not create any liability on the part of the Administrative Agent to the Borrower, each
other Creditor, and the Letter of Credit Issuers.
SECTION 4. CONDITIONS
4.1. Conditions Precedent to Drawdown of the Initial Advance under the Credit Facility . The obligation of the Lenders to make the initial
Advance available to the Borrower under this Agreement shall be expressly subject to the following conditions precedent:
(a) the Administrative Agent shall have received the following documents in form and substance satisfactory to the Administrative
Agent and its legal advisers:
(i) copies, certified as true and complete by an officer of each of the Security Parties of the resolutions of its board of directors
evidencing approval of this transaction and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to
execute this Agreement, the Notes and the Security Documents to which it is a party and any other documents required in connection
herewith on its behalf;
(ii) copies, certified as true and complete by an officer of each of the Security Parties or other applicable party, of all documents
evidencing any other necessary actions (including actions by such parties thereto other than the Security Parties as may be required
by the Lenders), approvals or consents with respect to this Agreement, the Notes and the Security Documents and the transactions
contemplated hereby and thereby;
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(iii) copies, certified as true and complete by an officer of each of the Security Parties of its certificate of incorporation and bylaws (or equivalent);
(iv) certificate of the Secretary, Assistant Secretary or other authorized officer of each of the Security Parties certifying as to
(x) the incumbency of the signatories of such Security Party, (y) the present directors of such Security Party and (z) the authorized,
issued and outstanding capital stock of each of the Helicopter Owning Subsidiaries legally and beneficially owned by the Borrower;
and
(v) good standing certificates of each of the Security Parties;
(b) the Security Parties shall have duly executed and delivered the following documents to which they are party:
(i) this Agreement;
(ii) the Notes;
(iii) the Guaranty;
(iv) the Pledge Agreement;
(v) the Security Agreement;
(vi) the Mortgages;
(vii) the Deposit Account Control Agreements in respect of the Deposit Accounts; and
(viii) the letter agreements referred to in Sections 14.3 and 14.4;
(c) the Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent of the issuance of
certificates of airworthiness with respect to each of the Mortgaged Helicopters issued by the State of Registration;
(d) the Administrative Agent shall have received proof of the ownership of each Mortgaged Helicopter by the Borrower or the
respective Helicopter Owning Subsidiary;
(e) the Administrative Agent shall have received evidence of registration reasonably satisfactory to the Administrative Agent, noting
the interest of the Borrower or the respective Helicopter Owning Subsidiary as the owner of such Mortgaged Helicopter, issued by the
State of Registration;
(f) the Administrative Agent shall have received certificates of insurance and where required by an Eligible Lease, reinsurance (if
applicable), from underwriters, insurers or brokers that demonstrate compliance with the Required Insurance provisions, together with
evidence that the Administrative Agent has been named loss payee and that the Agents and the Lenders are named as additional insureds in
respect of such insurance;
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(g) the Administrative Agent shall have received copies of all Eligible Leases;
(h) the Administrative Agent shall have received a certificate of the chief financial officer of the Borrower confirming the
representations and warranties set forth in Sections 2.1(l) and 2.1(p) and containing conclusions as to the solvency of the Borrower (on a
consolidated basis);
(i) the Agents and the Lenders shall have received payment in full of all fees and expenses due to them on the date hereof including,
without limitation, all fees and expenses due under Section 14;
(j) the Administrative Agent shall be satisfied that neither the Borrower nor any of the Subsidiaries is subject to any Environmental
Claim which could give rise to a Material Adverse Change;
(k) subject to receipt of the documents referenced in Section 7.2 from the Lenders, the Administrative Agent shall have received a
certificate signed by the Chief Financial Officer of the Borrower certifying that under applicable law existing on the date hereof, the
Borrower shall not be compelled by law to withhold or deduct any Taxes from any amounts to become payable to the Administrative
Agent for the account of the Creditors hereunder;
(l) the Borrower shall deliver to the Administrative Agent consolidated financial statements for the period ending September 30,
2011;
(m) the Lenders shall have received documentation to their satisfaction in connection with their know your customer requirements,
including but not limited to:
(i) certified list of directors, including titles, business and residential addresses and dates of birth;
(ii) certified true copy of photo identification (i.e. passport or driving license) and evidence of residential address (i.e. utility
bill or bank statement) for all authorized signatories;
(iii) with respect to the Borrower, certificate of ultimate beneficial ownership, certified by the respective secretary, assistant
secretary or other authorized officer of such entity; and
(iv) non-resident declaration forms, if applicable;
(n) no Material Adverse Change having occurred since September 30, 2011;
(o) the Administrative Agent having received such evidence as it may require that the Borrower and each of the Subsidiaries have
insured their respective properties and other assets (including the Helicopters) with underwriters and agents acceptable to the
Administrative Agent in the manner required under Section 2.1(k) and Section 2.1(n);
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(p) the Borrower shall have delivered to the Administrative Agent all advisable lien searches with respect to the Mortgaged
Helicopters, but such searches shall in all circumstances include lien searches with the International Registry, in the jurisdictions of the
Borrower and, if applicable, the operator of the related Mortgaged Helicopters, the State of Registration of each Mortgaged Helicopter and
any other jurisdiction reasonably requested by the Administrative Agent, and the Borrower shall have recorded and/or filed (or provide for
such recording or filing), as applicable, financing statements and/or termination agreements, as applicable, evidencing the termination of
the security interest of any other Person shown in such lien searches or otherwise required with respect to the Mortgaged Helicopters;
(q) the Administrative Agent shall have received appraisals, in form and substance satisfactory to the Administrative Agent, as to the
Fair Market Value of each of the Helicopters owned by the Borrower or the Helicopter Owning Subsidiaries, it being agreed that the
appraisal dated November 1, 2011 from Ascend Aviation Insight is acceptable for these purposes;
(r) the Borrower shall have delivered to the Administrative Agent:
(i) evidence of the filing or recording, as applicable, of (x) all necessary or advisable (as determined by the Administrative
Agent) instruments to effect the perfection of the Administrative Agent’s interest in the Collateral with the applicable Aviation
Authority (or other appropriate local authorities), the International Registry and (y) all necessary or advisable (as determined by the
Administrative Agent) UCC financing statements or amendments thereto and UCC termination statements (or similar documents of
similar import);
(ii) all necessary or desirable (as determined by the Administrative Agent) permits and documents of similar import in other
jurisdictions reasonably requested by the Administrative Agent and necessary or advisable to (x) perfect or otherwise record and
(y) protect the security interest of the Administrative Agent in the Collateral (including any deregistration power of attorney in favor
of the Administrative Agent or permits for the import and/or export of such Collateral from any applicable jurisdiction, if customary
in the relevant jurisdiction or as detailed in the opinion of local Aviation Authority counsel);
(iii) without limiting the foregoing, the Borrower shall have provided the Administrative Agent evidence of filing each
Mortgage with the FAA with respect to each Mortgaged Helicopter (including any amendments or supplements to any of the
foregoing);
(iv) there shall have been registered with the International Registry registrations evidencing the international interest (as
defined in the Cape Town Treaty) of: (x) the Mortgage on such Mortgaged Helicopter, as between the Borrower, as mortgagor and
the Administrative Agent, as mortgagee, and (y) if applicable, the Eligible Lease as between the Eligible Lessee, as lessee, the
Borrower or Helicopter Owning Subsidiary, as lessor, and the assignment thereof to the Administrative Agent, as assignee; and
(s) the Administrative Agent shall have received:
(i) a legal opinion or legal opinions of special counsel dated the date hereof in respect of local Aviation Authority matters
(including, without limitation as applicable, an opinion regarding any Cape Town Treaty filings), including (x) the required steps to
perfect a Mortgage Filing, the due taking of such steps to perfect, and the
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enforceability of the related Mortgage (if any), and (y) the taking of such other action in such jurisdiction as may be recommended or
customary, which counsel and opinion shall be in form and substance reasonably acceptable to the Administrative Agent; and
(ii) opinions from Seward & Kissel LLP, counsel to the Lenders and the Agents, Paul Robinson, Esq., General Counsel of the
Borrower, and Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, special counsel to the Borrower, in such form as the
Administrative Agent may agree, as well as such other legal opinions as the Lenders shall require as to all or any matters under the
laws of the United States of America, the State of New York and the corporate law of the State of Delaware covering the
representations and conditions which are the subjects of Sections 2 and 4 or in such other form as the Administrative Agent may
agree.
4.2. Further Conditions Precedent . The obligation of the Lenders to make any Advance (other than an Advance which occurs by reason of
a drawing under any Letter of Credit) available to the Borrower or issue a Letter of Credit shall be expressly and separately from the foregoing
conditional upon, on the relevant Drawdown Date:
(a) the Administrative Agent having received a Drawdown Notice in accordance with the terms of Section 3.5 or Section 3.6, as
applicable, or a Letter of Credit Request in accordance with the terms of Section 3.10, as applicable;
(b) the representations stated in Section 2 (updated mutatis mutandis) being true and correct as if made on that date;
(c) no Event of Default having occurred and being continuing and no event having occurred and being continuing which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default; and
(d) the Administrative Agent being satisfied that no Event of Default will arise following the drawdown of the Advance in question
by reason of the drawdown of the Advance and that no event or state of affairs exists which constitutes, in the reasonable opinion of the
Administrative Agent, a material risk that it will be unlawful or impossible for the Borrower to make any payment or perform any material
obligation as required under the terms of this Agreement, the Notes and the Security Documents.
4.3. Break Funding Costs . In the event that, on any date specified for the making of an Advance in any Drawdown Notice, the Lenders
shall not be obliged under this Agreement to make such Advance available under this Agreement, the Borrower shall indemnify and hold the
Lenders or any of them, fully harmless against any losses which they may sustain as a result of borrowing or agreeing to borrow funds to meet
the drawdown requirement in respect thereof and the certificate of such Lender, absent manifest error, shall be conclusive and binding on the
Borrower as to the extent of any such losses.
4.4. Satisfaction after Drawdown . Without prejudice to any of the other terms and conditions of this Agreement, in the event the Lenders,
in their sole discretion, make an Advance prior to the satisfaction of all or any of the conditions referred to elsewhere in Sections 4.1 and 4.2, the
Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions within fourteen (14) days after
the relevant Drawdown Date (or such longer period as the Lenders, in their sole discretion, may agree) and the failure of the Borrower to do so
will constitute an Event of Default.
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SECTION 5. REPAYMENT, PREPAYMENT AND REDUCTION
5.1. Repayment . The Borrower shall repay all outstanding Advances (subject to reductions and prepayments as hereinafter set forth) on the
Termination Date and shall also repay outstanding Advances, to the extent required to comply with (a) Section 3.11, (b) a reduction of the Credit
Facility pursuant to Section 5.4 or (c) as may be otherwise provided in this Agreement.
5.2. Optional Prepayment . The Borrower may prepay, upon three (3) Banking Days’ written notice, any outstanding Advance or any
portion thereof, without penalty, provided that such prepayment is made on the last day of the Interest Period covering such Advance. Each
prepayment shall be (a) in a minimum amount of One Million Dollars ($1,000,000), (b) in an amount equal to an integral multiple of such
minimum amount or (c) in the full amount of the Advance. On the date of prepayment (whether pursuant to this Section or as a consequence of
any reduction in the Committed Amount) all accrued interest to the date of such prepayment shall be paid in full with respect to Advances or
portion thereof being prepaid, together with any and all actual costs or expenses incurred by any Agent or Lender in connection with any
breaking of funding (as certified by the relevant Lenders, which certification, absent any manifest error, shall be conclusive and binding on the
Borrower).
5.3. Mandatory Prepayment . Upon (i) the sale of any Mortgaged Helicopter or (ii) the earlier of (x) ninety (90) days after an Event of Loss
of any of the Mortgaged Helicopters or (y) the date on which the insurance proceeds in respect of such loss are received by the Borrower or the
Administrative Agent, as assignee thereof, the Borrower shall apply such proceeds in prepayment of the Credit Facility to the extent (but only to
the extent) such prepayment is required in order for the Borrower to continue to comply with the covenants in Sections 10.1(a)(xvi) through
(xxi) of this Agreement. Any such prepayment shall be made together with interest thereon, breakfunding costs and the costs and expenses
provided for in Section 14.5.
5.4. Voluntary Permanent Reduction of the Committed Amount of the Credit Facility . The Borrower shall have the right, at any time and
from time to time, to request, without penalty, a permanent partial or whole reduction of the Committed Amount, provided that (a) the
Administrative Agent receives three (3) Banking Days’ prior written notice of such request, (b) if the then outstanding Credit Facility Balance
exceeds the Committed Amount as so reduced, such requested reduction occurs on the last day of the applicable Interest Period(s) for Advances
(or portions thereof) outstanding under this Agreement at least equal to the excess of the Credit Facility Balance over the reduced Committed
Amount and (c) after such reduction, the then outstanding Credit Facility Balance shall not exceed the Committed Amount as so reduced. Each
such partial permanent reduction shall be equal to or shall exceed Ten Million Dollars ($10,000,000) and shall be an integral multiple of Ten
Million Dollars ($10,000,000).
5.5. Reduction of Commitment . Simultaneously with each reduction of the Committed Amount (whether pursuant to Section 5.4 or
otherwise), each Lender’s Commitment in respect of the Credit Facility shall be reduced pro rata in proportion to their respective interests in the
Credit Facility.
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SECTION 6. INTEREST AND RATE
6.1. Applicable Rate . Except as otherwise provided in Sections 3.3 and 3.11, each Advance shall bear interest at a rate per annum (the
“Applicable Rate”) equal to the aggregate of (a) the Base Rate plus (b) the Applicable Margin for any Base Rate Advance and (x) LIBOR for the
applicable Interest Period, plus (y) the Applicable Margin for any LIBOR Advance. Upon the occurrence of an Event of Default or an event or
condition which, with the giving of notice or passage of time or both, would constitute an Event of Default, the Credit Facility Balance or any
other amount payable hereunder or under the Notes shall bear interest thereafter at a rate (the “Default Rate”) of two hundred basis points
(200 bp) over the otherwise Applicable Rate then in effect.
6.2. LIBOR; Interest Periods . With respect to each LIBOR Advance, the Borrower may select Interest Periods of one (1), three (3), six (6),
nine (9) or twelve (12) months (or such longer period as the Lenders may, in their sole discretion, agree), provided , however , that in no event
may the Borrower select an Interest Period of one (1) month more than six (6) times in any calendar year. The Borrower shall give an Interest
Notice to the Administrative Agent (which shall promptly forward same to the Lenders) at least three (3) Banking Days prior to the end of any
then existing Interest Period, which Interest Notice shall set forth the Interest Period selected. If at the end of any then existing Interest Period,
the Borrower fails to give an Interest Notice as provided herein, the following Interest Period shall have a duration of three (3) months. LIBOR
and the Applicable Rate shall be determined by the Administrative Agent two (2) Banking Days prior to the first day of the relevant Interest
Period and shall be promptly notified in writing to the Borrower. The Borrower’s right to select an Interest Period shall be further subject to the
restriction that no selection of an Interest Period shall be effective unless the Lenders are satisfied that the necessary funds will be available to
the Lenders for such period and the Administrative Agent is satisfied that no Event of Default or event which with notice or the passage of time,
or both, would constitute an Event of Default shall have occurred. No Interest Period may extend beyond the Termination Date.
6.3. Interest Payments . Interest on each Advance or portion thereof, shall be payable quarterly in arrears and on the last day of each
Interest Period.
6.4. Interest Due Only on Banking Day . If interest would, under Section 6.3, be payable on a day which is not a Banking Day, it shall then
be payable on the next following Banking Day, unless such next following Banking Day falls in the following month in which case it shall be
payable on the Banking Day immediately preceding the day on which such interest would otherwise be payable.
6.5. Calculation of Interest . All interest shall accrue from day to day and be calculated on the actual number of days elapsed and on the
basis of a three hundred sixty (360) day year.
SECTION 7. PAYMENTS
7.1. Place of Payments, No Set Off . All payments to be made hereunder by the Borrower shall be made on the due dates of such payments
to the Administrative Agent at its office located at 1525 W WT Harris Blvd., Charlotte, NC 28262 D1109-019 or to such other branch of the
Administrative Agent as the Administrative Agent may direct, without set-off or counterclaim
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and free from, clear of and without deduction for, any Taxes, provided , however , that if the Borrower shall at any time be compelled by law to
withhold or deduct any Taxes from any amounts payable to the Agents and the Lenders hereunder, then, subject to Section 7.2, the Borrower
shall pay such additional amounts as may be necessary in order that the net amounts received after withholding or deduction shall equal the
amounts which would have been received if such withholding or deduction were not required and, in the event any withholding or deduction is
made, whether for Taxes or otherwise, the Borrower shall promptly send to the Administrative Agent such documentary evidence with respect to
such withholding or deduction as may be required from time to time by the Agents and the Lenders or any thereof.
7.2. Proof of no Withholding . Each Lender and any transferee, assignee or participation holder (a “Transferee”) that is not incorporated
under the laws of the United States of America or a State thereof agrees that, on the initial Drawdown Date and prior to the first date on which
any payment is due to such Lender or Transferee hereunder, the Lender or Transferee shall deliver to the Borrower a duly completed United
States Internal Revenue Service Form W-8BEN or Form W-8ECI (or applicable successor form) indicating that such Lender is exempt from
United States withholding tax. Each Lender or Transferee that is incorporated under the laws of the United States or a State thereof shall, prior to
the first date on which any payment is due to such Lender or Transferee hereunder, deliver to the Borrower a United States Internal Revenue
Service Form W-9 (or applicable successor form). A Lender or Transferee subject to the provisions of this Section 7.2 further undertakes to
deliver to the Borrower another copy of any of the foregoing forms on or before the date that any such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form previously delivered thereby to the Borrower, unless in any such case an
event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would prevent such Lender or Transferee from duly completing and
delivering any such form with respect to it, and such Lender or Transferee has advised the Borrower that it is no longer exempt from United
States withholding tax or exempt from United States backup withholding tax, as the case may be. The Borrower shall not be required to pay any
additional amounts described in Section 7.1 hereof to the extent that the underlying Taxes arise as a result of (i) a Lender’s or a Transferee’s
failure to provide any applicable IRS form referred to in this Section 7.2 within sixty (60) days after the Borrower has made a written request for
such form, or (ii) the IRS determining upon audit of the Borrower that such IRS form submitted by the Lender or a Transferee is incorrect or
invalid.
7.3. Federal Income Tax Credits . In connection with the foregoing, each Lender may consult with its legal advisers, all fees and expenses
of which shall be for the account of the Borrower. If a Lender obtains the benefit of a credit against its liability for federal income taxes imposed
by the United States of America for all or part of the Taxes as to which the Borrower has paid additional amounts as aforesaid then such Lender
shall reimburse the Borrower for the amount of the credit so obtained.
SECTION 8. INTENTIONALLY OMITTED
8.1. [Intentionally Omitted]
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SECTION 9. EVENTS OF DEFAULT
9.1. Events of Default . In the event that any of the following events shall occur and be continuing:
(a) Principal and Interest Payments . Any payment of principal due on the Termination Date or otherwise due hereunder or under the
Notes or under any of them or any interest on any of the Advances, is not paid on the due date; or
(b) Other Payments . Any amount (other than principal and interest) becoming payable under this Agreement, under the Notes or
under the Security Documents or under any of them, is not paid on the due date or date of demand (as the case may be), and such default
continues unremedied for a period of three (3) Banking Days; or
(c) Insurance . Borrower shall fail to carry and maintain, or cause to be carried and maintained, insurance on and in respect of the
Mortgaged Helicopters in accordance with the provisions of Section 10.1(a)(xiv); or
(d) Representations, etc . Any representation, warranty or other statement made by the Security Parties in this Agreement or in any
other instrument, document or other agreement delivered in connection herewith or therewith proves to have been untrue or misleading in
any material respect as at the date as of which made or affirmed; or
(e) Impossibility, Illegality . It becomes impossible or unlawful for any of the Security Parties to fulfill any of the covenants and
obligations contained herein, in the Notes or in any of the Security Documents or for any of the Lenders to exercise any of the rights vested
in them hereunder, under the Notes or under the Security Documents and such impossibility or illegality in the reasonable opinion of the
Majority Lenders will give rise to a Material Adverse Change; or
(f) Citizenship . The Borrower or any of the Helicopter Owning Subsidiaries owning Helicopters registered under the laws of the
United States of America breaches Section 10.1(a)(vii) and, provided such default does not render any such Helicopter liable to forfeiture,
such default is not cured within thirty (30) days of its occurrence; or
(g) Helicopter Ownership and Registration . Any Mortgaged Helicopter is not owned by Borrower or one of the Helicopter Owning
Subsidiaries and duly registered under the laws of an Acceptable Jurisdiction in the name of the Borrower or such relevant Helicopter
Owning Subsidiary, as owner, or in the name of an Eligible Lessee, as operator under an Eligible Lease; or
(h) Covenants . The Borrower defaults in the performance of Sections 10.1(a) (vii) through (ix),(xvi) through (xxi), (xxv) through
(xxxiii) or Section 10.1(b); or
(i) Other Covenants . The Borrower defaults in the performance of any other term, covenant or agreement contained in this
Agreement, in the Notes, in the Security Documents or in any other instrument, document or other agreement delivered in connection
herewith or therewith, or there occurs any other event which constitutes a default under this Agreement, the Notes or the Security
Documents, in each case other than an Event of Default referred to elsewhere in this Section 9.1 and such default continues unremedied for
a period of ten (10) days following notice thereof by the Administrative Agent; or
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(j) Indebtedness . The Borrower or any of the Subsidiaries shall (a) default in the payment when due (subject to any applicable grace
period), whether by acceleration or otherwise, of any Funded Debt in excess of Twenty-five Million Dollars ($25,000,000), (b) default in
the observance or performance of any agreement or condition relating to any such Funded Debt or any other event shall occur or condition
exist, the effect of which default or other event or condition would entitle the holder or holders of such Funded Debt to declare any such
Funded Debt to become due prior to its stated maturity or (c) default in the observance or performance of any agreement or condition
relating to Indebtedness (other than Funded Debt) exceeding, in the aggregate, Twenty-five Million Dollars ($25,000,000); or
(k) Bankruptcy . The Borrower or any of the Subsidiaries commences any proceedings relating to any portion of its property under
any reorganization, arrangement or readjustment of debt, dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction (other than with respect to a corporate re-organization unrelated to a company’s insolvency), whether now or
hereafter in effect (“Proceeding”), or there is commenced against any thereof any Proceeding which Proceeding remains undismissed or
unstayed for a period of thirty (30) days; or any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any substantial portion
of the property of any thereof is appointed and is not discharged within a period of thirty (30) days; or any thereof by any act indicates
consent to or approval of or acquiescence in any Proceeding or to the appointment of any receiver, trustee, liquidator or sequestrator of, or
for, itself or any substantial portion of its property; or
(l) Judgments . (a) Any judgment or order is made the effect whereof would be to render ineffective or invalid this Agreement, the
Notes, the Security Documents or any thereof, (b) non-appealable final judgments or orders for the payment of money involving matters
not covered by insurance in excess of US$25,000,000 (or its equivalent in any other currency) in the aggregate for the Borrower and all of
its Subsidiaries shall be rendered against the Borrower and/or any of its Subsidiaries and such judgments or orders shall continue
unsatisfied and unstayed for a period of thirty (30) consecutive days unless the failure to promptly satisfy such judgment(s) would not
result in a Material Adverse Change or (c) any non-monetary judgment or order shall be rendered against the Borrower or any of its
Subsidiaries that could reasonably be expected to result in a Material Adverse Change, and there shall be any period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(m) Inability to Pay Debts . The Borrower or any of the Subsidiaries is unable to pay or admits its inability to pay its debts as they
fall due or if a moratorium shall be declared in respect of any Funded Debt of the Borrower or any of the Subsidiaries; or
(n) Change of Control . A Change of Control shall occur; or
(o) ERISA Debt . The Borrower or any member of the ERISA Group or any ERISA Affiliate, individually or collectively, shall
(i) fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it or they shall have become liable to pay under
the “minimum funding standard” requirements of Part 3, Subtitle B, of Title I of ERISA or Title IV of ERISA or any required contribution
to a Foreign Plan or (ii) incur, or shall reasonably expect to incur, any Withdrawal Liability or liability upon the happening of a
Termination Event; or
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(p) Termination of Operations; Sale of Assets . Except as expressly permitted under this Agreement, (i) the Borrower and its
Subsidiaries (taken as a whole) (a) ceases its operations or (b) sells or otherwise disposes of all or substantially all of its assets, (ii) all or
substantially all of the assets of the Borrower and its Subsidiaries (taken as a whole) are seized or otherwise appropriated or (iii) any
Security Party or any Helicopter Owning Subsidiary is dissolved or its usual business ceases or is suspended, provided that if a Helicopter
Owning Subsidiary is to be dissolved or is to cease or suspend its usual business, it must first transfer all of its assets, including all
Mortgaged Helicopters, to another Helicopter Owning Subsidiary which must then mortgage such Mortgaged Helicopters in favor of the
Administrative Agent; or
(q) Change in Financial Position . Any change in the operations or the financial position of the Borrower (taking into account the
operations and the financial position of the Borrower’s Subsidiaries as a whole) which, in the reasonable opinion of the Majority Lenders,
shall result in a Material Adverse Change; or
(r) Environmental Claims . The Borrower or its Subsidiaries shall become liable (whether, directly or indirectly, by indemnity or
contribution or otherwise) for remediation and/or environmental compliance expenses and/or fines, penalties or other charges which, in the
aggregate, has resulted in or is reasonably likely to result in a Material Adverse Change; or
(s) Mortgages . There is any default under any of the Mortgages; or
(t) Priority . Except as otherwise permitted hereunder, the Creditors shall cease to have a first priority perfected security interest in
any Collateral; or
(u) Ownership of Mortgaged Helicopters . The Borrower or any of the Helicopter Owning Subsidiaries ceases to have good and
marketable title to the Mortgaged Helicopters or any thereof, free and clear of all Liens or encumbrances other than Permitted Liens; or
(v) Documents Void . This Agreement, the Notes or any Security Document that has been executed by any Security Party shall cease
to be in full force and effect, shall be determined by any court to be void, voidable or unenforceable, or any Security Party shall assert in
writing any defense to any of its obligations under this Agreement, the Notes or any Security Document to which it is a party or otherwise
contest its liability thereunder, or any such Security Party shall rescind or revoke in writing (or attempt to rescind or revoke in writing) any
of its obligations under this Agreement, the Notes or any Security Document, whether with respect to future transactions or otherwise; or
(w) Material Adverse Change . A Material Adverse Change shall have occurred;
then the Lenders’ obligation to make the Credit Facility available shall cease and the Administrative Agent, on behalf of the Lenders, may (with
the consent of the Majority Lenders) and shall (upon the Majority Lenders’ instruction) by notice to the Borrower, (i) terminate the
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Commitments and declare the entire balance of the then outstanding Advances, accrued interest and any other sums payable by the Borrower
hereunder and under the Notes due and payable whereupon the same shall forthwith be due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived (provided that upon the happening of an event specified in subsections (k) or (m) of
this Section 9.1, the Notes shall be immediately due and payable without declaration or other notice to the Borrower), (ii) terminate any Letter of
Credit which may be terminated in accordance with its terms and (iii) direct the Borrower to pay (and the Borrower hereby agrees upon receipt
of such notice, or upon the occurrence of an Event of Default specified in subsection (k) or (m) of this Section 9.1, it will pay) to the
Administrative Agent at the office set forth in Section 7.1 such additional amounts, to be held as security in respect of Letters of Credit then
outstanding (if any), equal to the aggregate of the then Letter of Credit Outstandings, such amounts to be repaid to the Borrower to the extent not
utilized to cover Letter of Credit drawings. In such event, the Administrative Agent and the Lenders may proceed to protect and enforce their
rights by action at law, suit in equity or other appropriate proceeding, whether for specific performance of any covenant contained in this
Agreement or in the Notes or in aid of the exercise of any power granted herein or therein, or the Administrative Agent and the Lenders may
proceed to enforce the payment of the Notes when due or to enforce any other legal or equitable right of the Lenders, or proceed to take any
action authorized or permitted by applicable laws for the collection of all sums due, or so declared due, on the Notes, including, without
limitation, the right to appropriate and hold or apply (directly, by way of set-off or otherwise) to the payment of the obligations of the Borrower
hereunder and/or under the Notes (whether or not then due) all moneys and other amounts of the Borrower, then or thereafter in possession of the
Lenders, the balance of any deposit account (demand or time, matured or unmatured) of the Borrower then or thereafter with the Lenders and
every other claim of the Borrower then or thereafter against the Lenders. Notwithstanding the foregoing, the Administrative Agent on behalf of
the Lenders, may proceed to exercise any of the additional remedies set forth in Section 9.2.
9.2. Remedies .
(a) Sale of Collateral.
(i) If an Event of Default shall have occurred, then and in every such case the Administrative Agent may exercise any or all of
the rights and powers and pursue any and all of the remedies pursuant to this Section 9 and shall have and may exercise all of the
rights and remedies of a secured party under the Uniform Commercial Code or of a chargee under the Cape Town Treaty and may
take possession of all or any part of the properties covered or intended to be covered by the Lien created hereby or pursuant hereto
and may exclude the Borrower and all persons claiming under it wholly or partly therefrom. Without limiting any of the foregoing, it
is understood and agreed that the Administrative Agent may exercise any right of sale of the Mortgaged Helicopters available to it,
even though it shall not have taken possession of the Mortgaged Helicopters and shall not have possession thereof at the time of such
sale.
(ii) The Administrative Agent shall be entitled, at any sale pursuant to this Section 9.2, to credit against any purchase price bid
at such sale all or any part of the unpaid obligations owing to the Lenders and secured by the Lien in favor of the Administrative
Agent.
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(iii) In the event of any sale of the Collateral, or any part thereof, pursuant to any judgment or decree of any court or otherwise
in connection with the enforcement of any of the terms of this Agreement, the entire balance of the then outstanding Advances,
together with accrued interest thereon, and other amounts due hereunder, shall immediately become due and payable without
presentment, demand, protest or notice, all of which are hereby waived.
(b) Return of Aircraft, Etc.
(i) If an Event of Default shall have occurred and be continuing and the Notes have been accelerated, at the request of the
Administrative Agent, the Borrower shall promptly execute and deliver to the Administrative Agent such instruments of title and
other documents as the Administrative Agent may deem necessary or advisable to enable the Administrative Agent or an agent or
representative designated by the Administrative Agent, at such time or times and place or places as the Administrative Agent may
specify, to obtain possession of all or any part of the Collateral to which the Administrative Agent shall at the time be entitled
hereunder. If the Borrower shall for any reason fail to execute and deliver such instruments and documents after such request by the
Administrative Agent, the Administrative Agent may (i) obtain a judgment conferring on the Administrative Agent the right to
immediate possession and requiring the Borrower to execute and deliver such instruments and documents to the Administrative
Agent, to the entry of which judgment the Borrower hereby specifically consents to the fullest extent permitted by Applicable Law,
and (ii) pursue all or part of such Collateral wherever it may be found and may enter any of the premises of Borrower wherever such
Collateral may be or be supposed to be and search for such Collateral and take possession of and remove such Collateral. All
expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien
in favor of the Administrative Agent.
(ii) Upon every such taking of possession, the Administrative Agent may, from time to time, at the expense of the Collateral,
make all such expenditures for maintenance, use, operation, storage, insurance, leasing, control, management, disposition,
modifications or alterations to and of the Collateral, as it may deem proper. In each such case, the Administrative Agent shall have
the right to maintain, use, operate, store, insure, lease, control, manage, dispose of, modify or alter the Collateral and to exercise all
rights and powers of the Borrower relating to the Collateral, as the Administrative Agent shall deem best, including the right to enter
into any and all such agreements with respect to the maintenance, use, operation, storage, insurance, leasing, control, management,
disposition, modification or alteration of the Collateral or any part thereof as the Administrative Agent may determine, and the
Administrative Agent shall be entitled to collect and receive directly all rents, revenues and other proceeds of the Collateral and
every part thereof, without prejudice, however, to the right of the Administrative Agent under any provision of this Agreement to
collect and receive all cash held by, or required to be deposited with, the Administrative Agent hereunder. Such rents, revenues and
other proceeds shall be applied to pay the expenses of the maintenance, use, operation, storage, insurance, leasing, control,
management, disposition, improvement, modification or alteration of the Collateral and of conducting the business thereof, and to
make all payments which the Administrative Agent may be required or may elect to make, if any, for taxes, assessments, insurance or
other
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proper charges upon the Collateral or any part thereof (including the employment of engineers and accountants to examine, inspect
and make reports upon the properties and books and records of the Borrower), and all other payments which the Administrative
Agent may be required or authorized to make under any provision of this Agreement, as well as just and reasonable compensation for
the services of the Administrative Agent, and of all persons properly engaged and employed by the Administrative Agent with
respect hereto.
(c) Remedies Cumulative . Each and every right, power and remedy given to the Administrative Agent specifically or otherwise in
this Agreement shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or
hereafter existing at Applicable Law, in equity or by statute, and each and every right, power and remedy whether specifically herein given
or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Administrative
Agent, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Administrative Agent in the exercise
of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Borrower or to be an acquiescence therein.
(d) Discontinuance of Proceedings . In case the Administrative Agent shall have instituted any proceeding to enforce any right,
power or remedy under this Agreement by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Administrative Agent, then and in every such case the Borrower
and the Administrative Agent shall, subject to any determination in such proceedings, be restored to their former positions and rights
hereunder with respect to the Collateral, and all rights, remedies and powers of the Borrower or the Administrative Agent shall continue as
if no such proceedings had been instituted.
(e) Waiver of Past Defaults . Upon written instruction from a Majority Lenders, the Administrative Agent shall waive any past Event
of Default hereunder and its consequences and upon any such waiver such Event of Default shall cease to exist and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this Agreement, but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereon; provided , that in the absence of written instructions from all
the Lenders, the Administrative Agent shall not waive any Event of Default (i) in the payment of the then outstanding balance of
Advances, and interest and other amounts due under any Note then outstanding, or (ii) in respect of a covenant or provision hereof which,
under the terms of this Agreement, cannot be modified or amended without the consent of each Lender.
(f) Appointment of Receiver . The Administrative Agent shall, as a matter of right, be entitled to the appointment of a receiver (who
may be the Administrative Agent or any successor or nominee thereof) for all or any part of the Collateral, whether such receivership be
incidental to a proposed sale of the Collateral or the taking of possession thereof or otherwise, and the Borrower hereby consents to the
appointment of such a receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Collateral shall
be entitled to exercise all the rights and powers of the Administrative Agent with respect to the Collateral.
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(g) Administrative Agent Authorized to Execute Bills of Sale, Etc. The Borrower irrevocably appoints, while an Event of Default has
occurred and is continuing, the Administrative Agent the true and lawful attorney-in-fact of the Borrower (which appointment is coupled
with an interest) in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the
enforcement of the Lien in favor of the Administrative Agent, whether pursuant to foreclosure or power of sale, assignments and other
instruments as may be necessary or appropriate, with full power of substitution, the Borrower hereby ratifying and confirming all that such
attorney or any substitute shall do by virtue hereof in accordance with Applicable Law. Nevertheless, if so requested by the Administrative
Agent or any purchaser, the Borrower shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering
to the Administrative Agent or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(h) Rights of Lenders to Receive Payment . Notwithstanding any other provision of this Agreement, the right of any Lender to
receive payment of principal of, and premium, if any, and interest on a Note on or after the respective due dates expressed in such Note, or
to bring suit for the enforcement of any such payment on or after such respective dates in accordance with the terms hereof, shall not be
impaired or affected without the consent of such Lender.
9.3. Indemnification . The Borrower agrees to, and shall, indemnify, reimburse and hold each of the Agents and the Lenders harmless
against any loss or reasonable costs or expenses (including legal fees and expenses) which any of the Agents and the Lenders sustains or incurs
as a consequence of any default in payment of the principal amount of any Advance or interest accrued thereon or any other amount payable
hereunder or under the Notes including, but not limited to, all actual losses incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Credit Facility or any part thereof and any costs incurred by any of the Agents and the Lenders
in connection with the unwinding of any interest rate swap or other hedging arrangements.
9.4. Application of Moneys . All moneys received by any of the Lenders under or pursuant to this Agreement, the Notes or the Security
Documents after the happening of any Event of Default shall be applied by the Administrative Agent in the following manner:
(a) first, in or towards the payment or reimbursement of any expenses or liabilities incurred by the Agents and the Lenders in
connection with the ascertainment, protection or enforcement of the Agents’ and the Lenders’ rights and remedies hereunder and under the
Notes,
(b) secondly, in or towards payment of any interest and fees owing in respect of the Advances,
(c) thirdly, in or towards repayment of the Advances,
(d) fourthly, as security in respect of Letters of Credit then outstanding, in the aggregate amount of the then Letter of Credit
Outstandings,
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(e) fifthly, in or towards payment of all other sums which may be owing to the Agents and the Lenders under this Agreement, the
Notes or the Security Documents,
(f) sixthly, any other amounts secured by the Security Documents; and
(g) seventhly, after all Letters of Credit have expired or are terminated, the surplus (if any), as well as any moneys held as security
for Letters of Credit to the extent not utilized to cover Letters of Credit, shall be paid to the Borrower or to whomsoever else may be
entitled thereto.
SECTION 10. COVENANTS
10.1. Covenants . Each of the Security Parties hereby covenants and undertakes with the Agents and the Lenders that, from the date hereof
and so long as (x) any commitments to advance credit hereunder remain in effect or (y) any principal, interest or other moneys are owing in
respect of the Credit Facility or otherwise owing under this Agreement or under the Notes:
(a) Each of the Security Parties will:
(i) Know Your Client Confirmation . Upon the Administrative Agent’s request, promptly supply, or procure the supply of, such
documentation and other evidence as is reasonably requested by the Administrative Agent in order for each Lender to carry out and
be satisfied with the results of all necessary “know your client” or other checks which it is required to carry out in relation to the
transactions contemplated by this Agreement, the Notes and the Security Documents and to the identity of any parties to this
Agreement, the Notes and the Security Documents (other than the Lenders) and their directors and officers;
(ii) Performance of Agreements . Duly perform and observe the terms of this Agreement, the Notes and the Security
Documents;
(iii) Compliance with Covenants . Comply with each of its covenants set forth in this Agreement;
(iv) Notice . Promptly inform the Administrative Agent of the occurrence of (a) any Event of Default or of any event which
with the giving of notice or lapse of time, or both, would constitute an Event of Default, (b) any litigation or governmental
proceeding pending or overtly threatened against it or against any of the Subsidiaries which could reasonably be expected to give rise
to a Material Adverse Change, (c) any Event of Loss in respect of any Mortgaged Helicopter or other accidents or damage to any
Mortgaged Helicopter involving an amount in excess of $5,000,000, (d) any lapse of the Required Insurance in respect of any
Mortgaged Helicopter; or (d) any other event or condition of which it becomes aware which could reasonably be expected to give
rise to a Material Adverse Change;
(v) Obtain Consents . Without prejudice to Section 2.1 and any other provision of this Section 10.1, obtain every consent and
do all other acts and things which may from time to time be necessary or advisable for the continued due performance of all its
obligations under this Agreement, the Notes and the Security Documents;
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(vi) Financial Statements and Other Information . Deliver to the Administrative Agent (in sufficient number of copies to
provide one to each Lender):
(A) as soon as available but not later than ninety (90) days after the end of each fiscal year of the Borrower, complete copies
of the audited consolidated financial reports of the Borrower (together with a Compliance Certificate), all in reasonable detail
which shall include at least the consolidated balance sheet of the Borrower as of the end of such year and the related
statements of income for such year as well as the related statement of sources and uses of funds for such year for the
Borrower, each as prepared in accordance with GAAP, all in reasonable detail, which shall be audited by an Acceptable
Accounting Firm, or (as applicable) a complete copy of the 10K report (or equivalent) of the Borrower filed with the United
States Securities and Exchange Commission (including audited annual consolidated financial statements of the Borrower, in
each case setting forth comparative consolidated figures for the preceding fiscal year, together with a report thereon by an
Acceptable Accounting Firm whose opinion shall not be qualified as to the scope of audit and as to the status of the Borrower
and its Subsidiaries as a going concern), which shall be prepared by the Borrower and certified by the chief financial officer
of the Borrower, together with a Compliance Certificate from such chief financial officer;
(B) as soon as available but not later than sixty (60) days after the end of each quarter of each fiscal year of the Borrower, a
quarterly interim balance sheets and profit and loss statements of the Borrower and the related profit and loss statements as
well as the related statement of sources and uses of funds for such year for the Borrower (together with a Compliance
Certificate), all in reasonable detail, unaudited, but certified to be true and complete by the chief financial officer of the
Borrower or (as applicable) a copy of the 10Q report (or equivalent) of the Borrower filed with the United States Securities
and Exchange Commission which shall be prepared by the Borrower and certified by the chief financial officer of the
Borrower, together, in each instance, with a Compliance Certificate from such chief financial officer;
(C) (as applicable) within ten (10) days of filing, notice of the filing of all 8K reports (or equivalent) filed by the Borrower
with the United States Securities and Exchange Commission (or any similar governmental authority) and deliver to the
Administrative Agent, promptly on its request therefor, copies of such filings;
(D) (as applicable) promptly upon the mailing thereof to the shareholders of the Borrower, copies of all financial statements,
reports and proxy statements so mailed;
(E) (as applicable) within ten (10) days of filing, notice of the filing of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its equivalent) which the Borrower shall have filed with the United
States Securities and Exchange Commission (or similar governmental authority) and deliver to the Administrative Agent,
promptly on its request therefor, copies of such filings;
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(F) such other statement or statements, lists of property and accounts, forecasts, reports and financial information (including a
listing of all outstanding indebtedness of the Borrower and the Subsidiaries for borrowed monies) with respect to the business,
operations and management of the Borrower and the Subsidiaries and the employment of the assets owned or operated
directly or indirectly by the Borrower or any of the Subsidiaries as the Administrative Agent may from time to time
reasonably request in writing and any material reports received by any thereof from their independent certified accountants;
and
(G) include in each Compliance Certificate when requested by the Administrative Agent from time to time a List of Liens,
current as of the date of such Compliance Certificate;
(vii) Qualification to Own U.S. Registered Helicopters . Throughout the Credit Period, the Borrower shall remain a United
States citizen as defined by the FAA and be qualified to register the Mortgaged Helicopters in its name with the FAA and each of the
Helicopter Owning Subsidiaries shall (i) be a United States citizen as defined by the FAA and be qualified to register its Mortgaged
Helicopters in its name with the FAA or (ii) be qualified to register its Mortgaged Helicopters in its name under the laws of an
Acceptable Jurisdiction;
(viii) Corporate Existence . Do or cause to be done all things necessary to preserve and keep in full force and effect its
corporate existence, as well as the corporate existence of its Subsidiaries, and all licenses, franchises, permits and assets necessary to
the conduct of its business and the business of its Subsidiaries;
(ix) Books, Records, etc . Keep, and cause each of the Subsidiaries to keep, proper books of record and account into which full
and correct entries shall be made, in accordance with GAAP throughout the Credit Period;
(x) Inspection . Allow any representative or representatives designated by the Administrative Agent, subject to applicable laws
and regulations, to visit and inspect any of its or any of the Subsidiaries’ properties, and, on request, to examine its or any of the
Subsidiaries’ books of account, records, reports and other papers (and to make copies thereof and to take extracts therefrom) and to
discuss the affairs, finances and accounts of any thereof with its officers and executive employees all at such reasonable times and as
often as the Administrative Agent reasonably requests;
(xi) Taxes . Pay and discharge, and cause each of the Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property prior to the date upon which penalties attach thereof;
provided , however , that neither it nor any such Subsidiary shall be required to pay and discharge any such tax, assessment, charge
or levy which is being contested in good faith and by appropriate proceedings or other acts and so long as it or such Subsidiary shall
set aside on its books adequate reserves with respect thereto;
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(xii) Compliance with Statutes, etc . Do, or cause to be done, all things necessary to comply with all material laws, and the rules
and regulations thereunder, applicable to itself or to any of the Subsidiaries including, without limitation, those laws, rules and
regulations relating to employee benefit plans and environmental matters;
(xiii) Environmental Matters Promptly upon the occurrence of any of the following conditions, provide to the Administrative
Agent a certificate of a chief executive officer thereof, specifying in detail the nature of such condition and its proposed response or
the response of its Environmental Affiliate: (a) its receipt or the receipt by any Subsidiary or any of their Environmental Affiliates of
any communication whatsoever that alleges that such person is not in compliance with any applicable environmental law or
environmental approval, if such noncompliance could reasonably be expected to give rise to a Material Adverse Change,
(b) knowledge by it, any Subsidiary or any of their Environmental Affiliates that there exists any Environmental Claim pending or
threatened against any such person, which could reasonably be expected to give rise to a Material Adverse Change, or (c) any release,
emission, discharge or disposal of any material that could form the basis of any Environmental Claim against it, any Subsidiary or
any of their Environmental Affiliates if such Environmental Claim could reasonably be expected to give rise to a Material Adverse
Change. Upon the written request by the Administrative Agent, it will submit to the Administrative Agent at reasonable intervals, a
report providing an update of the status of any issue or claim identified in any notice or certificate required pursuant to this
subsection;
(xiv) Insurance . (A) Shall, and shall procure that each of the Subsidiaries shall, maintain the insurances on its properties
described in Sections 2.1(k) and (n), in amounts and with underwriters, brokers and protection and indemnity clubs acceptable to the
Administrative Agent, and the Borrower shall provide the Administrative Agent with such documentation as the Administrative
Agent should reasonably require evidencing the same and the Borrower shall comply with, or cause to be complied with the Required
Insurance.
(B) Nothing in this Section 10.1(a)(xiv) shall limit or prohibit (a) Borrower from maintaining the policies of insurance as
required by the Required Insurance with higher limits than those specified in the definition of “Required Insurance”, or
(b) Administrative Agent from obtaining insurance for its own account (and any proceeds payable under such separate
insurance shall be payable as provided in the policy relating thereto); provided , however , that no insurance may be obtained
or maintained that would limit or otherwise adversely affect the coverage of any insurance required to be obtained or
maintained by the Required Insurance.
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(C) The Administrative Agent agrees to accept, in lieu of insurance against any risk with respect to the Mortgaged
Helicopters, indemnification from, or insurance provided by, the U.S. Government, or upon the written consent of the
Majority Lenders, an other Government Entity, against such risk in an amount that, when added to the amount of insurance, if
any, against such risk that Borrower (or the applicable Helicopter Owning Subsidiary or any Eligible Lessee) may continue to
maintain, in accordance with this Section 10.1(a)(xiv), during the period of such requisition or transfer, shall be at least equal
to the amount of insurance against such risk otherwise required by this Section 10.1(a)(xiv).
(D) All insurance proceeds in respect of the occurrence of an Event of Loss with respect to any Mortgaged Helicopter shall be
paid to the Administrative Agent and applied in accordance with Section 5.3. To the extent that the Borrower is not required
to prepay the Credit Facility in order to comply with the covenants in Section 10.1(a)(xvi) to (xxi) of this Agreement and an
Event of Default has not occurred and is continuing, the Administrative Agent shall distribute the proceeds to the Borrower.
All insurance proceeds received as a result of damage to a Mortgaged Helicopter from an occurrence that is not an Event of
Loss shall be paid to the Borrower provided that the Borrower is in compliance with all covenants and an Event of Default has
not occurred and is continuing.
(xv) Maintenance of Assets . Maintain and keep, and cause the Subsidiaries to maintain and keep, all properties used or useful
in the conduct of their business in good condition, repair and working order and supplied with all necessary equipment and will
make, or cause to be made, all necessary repairs, renewals and replacements thereof so that the business carried on in connection
therewith and every portion thereof may be properly and advantageously conducted at all times;
(xvi) Interest Coverage Ratio . Maintain, on a consolidated basis, commencing with the completion of the fiscal quarter ending
March 31, 2012, an Interest Coverage Ratio of not less than 3.0 to 1.0, determined as at the end of each fiscal quarter;
(xvii) Funded Debt/EBITDA . Maintain, on a consolidated basis, a ratio of Funded Debt to EBITDA of not more than 4.0 to
1.0, determined as at the end of each fiscal quarter, provided , however , that upon successful placement of a Qualified Notes
Offering, the Borrower shall maintain a ratio of Funded Debt to EBITDA of not more than 5.0 to 1.0, determined as at the end of
each fiscal quarter;
(xviii) Secured Funded Debt/EBITDA . Upon successful placement of a Qualified Notes Offering, maintain, on a consolidated
basis, a ratio of Secured Funded Debt to EBITDA of not more than (i) 3.0 to 1.0 through the fiscal quarter ending December 31, 2012
and (ii) 2.5 to 1.0 thereafter, determined as at the end of each fiscal quarter;
(xix) Funded Debt/Fair Market Value of Owned Helicopters . Procure that the Funded Debt shall not exceed sixty percent
(60%) of the aggregate Fair Market Value of all Helicopters;
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(xx) Fair Market Value of Mortgaged Helicopters /Funded Debt . Procure that the ratio of (A) the sum of (i) the aggregate Fair
Market Value of all Mortgaged Helicopters and (ii) the aggregate value of the Borrower’s Accounts Receivable and Inventory (each
as determined in accordance with GAAP) to (B) Funded Debt shall at all times equal or exceed one hundred twenty percent (120%);
(xxi) Fair Market Value of United States Registered Helicopters . Procure that all times, at least sixty percent (60%) of the
aggregate Fair Market Value of all Mortgaged Helicopters comprises Mortgaged Helicopters that are registered and operated in the
United States;
(xxii) ERISA Matters . Forthwith upon learning of the occurrence of any material liability of the Borrower or any member of
the ERISA Group or any ERISA Affiliate in connection with the termination any Withdrawal Liability or the happening of a
Termination Event or of a failure to satisfy the minimum funding standards of Section 412 of the Code or Part 3, Subtitle B, of Title I
of ERISA or similar funding requirements by any Plan, Multiple Employer Plan, Multiemployer Plan or Foreign Plan maintained or
contributed to by the Borrower, any member of the ERISA Group or any ERISA Affiliate, furnish or cause to be furnished to the
Lenders written notice thereof;
(xxiii) End of Fiscal Year . Cause, for financial reporting purposes, (a) each of its fiscal years to end on December 31 of each
year and (b) each of its fiscal quarters to end on March 31, June 30, September 30 and December 31;
(xxiv) SEACOR Preferred Shares . Unless a Qualified Equity Recapitalization has occurred prior to the Closing Date, the
Borrower may use a portion of the proceeds of the Credit Facility to repay the balance of existing advances previously made by
SEACOR to the Borrower after SEACOR (i) converts at least US$180,000,000 of such existing advances to common shares of the
Borrower and (ii) converts no less than US$138,750,000 and no more than US$150,000,000 of such existing advances to 6%
cumulative preferred shares of the Borrower (containing such designations and rights as the Majority Lenders shall approve) (the
“SEACOR Preferred Shares”). Notwithstanding Section 10.1(b)(iii), the Borrower shall be permitted to pay dividends quarterly on
the SEACOR Preferred Shares as and when due provided that (i) at least US$50,000,000 will be available under the Credit Facility
after such payments are made and (ii) the Borrower is and shall be in compliance with Sections 10.1(a)(xvi) through (xxi) after
giving effect to such payment. The SEACOR Preferred Shares shall be subject to redemption only from the proceeds of a Qualified
Equity Recapitalization and only if no Event of Default has occurred and is continuing;
(xxv) Appraisals . The Borrower, at its expense, shall deliver an annual appraisal report in respect of all Helicopters, at the
request of the Administrative Agent or any Lender, with such appraisal to be prepared by an appraiser satisfactory to the Majority
Lenders and indicating the Fair Market Value of each Helicopter. If a Mortgaged Helicopter becomes Collateral during the year for
which an appraisal has already been provided, the purchase price of such Mortgaged Helicopter (as evidenced by the applicable
invoice) shall be used as the Fair Market Value of such Mortgaged Helicopter;
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(xxvi) Helicopter De-Registration Event . In respect of any Mortgaged Helicopter, the Borrower or the applicable Helicopter
Owning Subsidiaries shall:
(A) Furnish to the Administrative Agent, as soon as available but in any event no later than ten (10) Banking Days prior to the
proposed date of any de-registration of a Mortgaged Helicopter under the law of a jurisdiction then applicable to such
Mortgaged Helicopter (a “ De-Registration Event ”), a notice of such De-Registration Event;
(B) Furnish to the Administrative Agent, on or prior to the date of any De-Registration Event, a certificate of the Borrower,
signed on behalf of the Borrower by a duly authorized officer of the Borrower, stating that:
I.
The representations and warranties contained in this Agreement, the Notes and the Security Documents are correct
on and as of the date of such De-Registration Event, before and after giving effect to such De-Registration Event;
II.
No event has occurred and is continuing, or would result from such De-Registration Event, that constitutes an
Event of Default;
III.
Since the date hereof, there has been no development or event, or any prospective development or event, which
has had or is reasonably likely to result in a Material Adverse Change;
IV.
The reason for the De-Registration Event is that the subject Mortgaged Helicopter will be operated in a
jurisdiction other than the jurisdiction it is operating in at that time;
V.
After the De-Registration Event, at least 60% of the aggregate Fair Market Value of all Mortgaged Helicopters
shall be comprised of Mortgaged Helicopters that are registered in the United States; and
VI.
After the De-Registration Event, the ratio of (A) the sum of (i) the aggregate Fair Market Value of all Mortgaged
Helicopters and (ii) the aggregate value of the Borrower’s Accounts Receivable and Inventory (each as determined
in accordance with GAAP) to (B) Funded Debt shall at all times equal or exceed one hundred twenty percent
(120%);
VII. Upon receipt of a certificate certifying the items required by clauses (a) through (b) above of this subparagraph
(xxiv), the Administrative Agent shall, unless it has reason to believe that the certificate referred to in this clause
(VII) shall be incorrect in a material respect, release the applicable Mortgage as it relates to the Mortgaged
Helicopter proposed to be de-registered. Each Lender agrees that the Administrative Agent shall be entitled to rely
on any
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document submitted to it by the Borrower hereunder and that no Lender need be consulted or notified in advance
of any De-Registration Event provided for in this Section 10.1(a)(xxvi). The Administrative Agent shall, promptly
following any such De-Registration Event, give notice thereof to all Lenders.
(xxvii) New Helicopters . In the event the Borrower desires to add any new Helicopter to the list of Mortgaged Helicopters in
Schedule B hereto, whether or not to replace any Mortgaged Helicopter that is the subject of a De-Registration Event pursuant to
Section 10.1(a)(xxvi), such new Helicopter shall be added to Schedule B hereto by the Administrative Agent (who shall send to all
parties hereto a revised Schedule B adding such new Helicopter), so long as the Borrower shall furnish to the Administrative Agent
on or prior to the date of addition of such new Helicopter the items listed in clauses (A) through (L) below:
(A) A Mortgage for such new Helicopter together with evidence that a Mortgage Filing with respect to such Mortgage is in
full force and effect as of the date of addition of such new Helicopter;
(B) A supplement to the Security Agreement;
(C) An invoice indicating the purchase price of such new Helicopter;
(D) Certificate of the Borrower, signed on behalf of the Borrower by a duly authorized officer of the Borrower, stating that:
I.
the representations and warranties contained in this Agreement, the Notes and each Security Document are correct
on and as of the date of the addition of such new Helicopter, before and after giving effect to the addition of such
new Helicopter;
II.
no event has occurred and is continuing, or would result from the addition of such new Helicopter, that constitutes
an Event of Default;
III.
the State of Registration for such Helicopter is an Acceptable Jurisdiction; and
IV.
since the date hereof, there has been no development or event, or any prospective development or event, which has
had or is reasonably likely to result in a Material Adverse Change;
(E) Evidence of the filing or recording, as applicable, of all necessary or advisable (as determined by the Administrative
Agent) instruments to effect the perfection of the Administrative Agent’s interest in the new Helicopter with the applicable
Aviation Authority;
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(F) All necessary or desirable (as determined by the Administrative Agent) permits and documents of similar import in other
jurisdictions reasonably requested by the Administrative Agent and necessary or advisable to (x) perfect or otherwise record
and (y) protect the security interest of the Administrative Agent in the new Helicopter (including any IDERA in favor of the
Administrative Agent, as applicable);
(G) A legal opinion or legal opinions of special counsel in respect of local Aviation Authority matters including, without
limitation as applicable, (x) an opinion regarding any Cape Town Treaty filings (y) the required steps to perfect a Mortgage
Filing, the due taking of such steps to perfect, and the enforceability of the related Mortgage (if any), and (z) the taking of
such other action in such jurisdiction as may be recommended or customary, which counsel and opinion shall be in form and
substance reasonably acceptable to the Administrative Agent; and (ii) a favorable opinion of Baker, Donelson, Bearman,
Caldwell & Berkowitz, PC, special counsel to the Borrower, in such form as the Administrative Agent may agree, with
respect to such new Helicopter and as to such other matters as the Administrative Agent may reasonably request;
(H) A copy of the registration certificate of such Helicopter, or other evidence of registration reasonably satisfactory to the
Administrative Agent, noting the interest of the Borrower or the applicable Helicopter Owning Subsidiary as the owner of
such Helicopter, issued by the State of Registration (if available) and, if reasonably available, a copy of the certificate of
airworthiness issued by the State of Registration, or other evidence reasonably satisfactory to the Administrative Agent of the
issuance of such certificate of airworthiness;
(I) A Guaranty supplement duly executed by each Person who, prior to such execution, was not a Guarantor, and who has any
ownership interest in such new Helicopter;
(J) Acknowledgment copies or stamped receipt copies of proper financing statements (if applicable), duly filed under the
Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to
perfect and protect the first priority liens and security interests created under the applicable Security Documents;
(K) If the new Mortgaged Helicopter shall be subject to a lease with a third party operator, the Borrower shall provide a
certified checklist setting forth the extent of such lease’s compliance with the requirements contained in the definition of
“Eligible Lessee” and “Eligible Lease”, including compliance with the Required Insurance provisions;
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(L) Each Lender agrees that the Administrative Agent shall be entitled to rely on any document submitted to it by the
Borrower hereunder and that no Lender need be consulted or notified in advance regarding a new Helicopter to be made
subject to Security Documents and added to Schedule B hereto as provided in this Section 10.1(a)(xxvii). The Administrative
Agent shall promptly notify each Lender following the addition of each new Helicopter;
(M) To the extent that a new Helicopter is to be a Mortgaged Helicopter in order to comply with Section 10.1(a)(xxi) of this
Agreement, such new Helicopter shall be registered in the United States. If the Borrower does not own any Helicopters
(excluding Mortgaged Helicopters) that are registered in the United States, such new Helicopter shall be registered in an
Acceptable Jurisdiction in Tier 1. If the Borrower does not own any Helicopters (excluding Mortgaged Helicopters) that are
registered in the United States or in an Acceptable Jurisdiction in Tier 1, such new Helicopter shall be registered in an
Acceptable Jurisdiction in Tier 2;
(N) All new Mortgaged Helicopters shall be bound by the provisions under the Credit Agreement and the Security Documents
that relate to the Mortgaged Helicopters;
(xxviii) Visitation Rights . At any reasonable time and from time to time, permit visitation and inspection of any Mortgaged
Helicopter and the making of copies of Helicopter Related Documents and Records;
(xxix) Perfection and Priority of Collateral .
(A) Take whatever actions are necessary or appropriate in a timely manner to perfect with first priority and continue the
Administrative Agent’s security interests with first priority in the Collateral. The Borrower will deliver to the Administrative
Agent documents evidencing or constituting such perfection and priority status of the Collateral upon the Administrative
Agent’s request. Notwithstanding the foregoing, the Borrower will take such actions as the Administrative Agent may
reasonably request from time to time to perfect or maintain the perfection and priority of any Collateral. The Borrower and
each other Security Party hereby appoints the Administrative Agent as its irrevocable attorney-in-fact for the purpose of
executing any documents necessary to perfect or continue the security interests of the Administrative Agent, included, but not
limited to, the filing of Uniform Commercial Code financing statements. Without limiting the foregoing, the Borrower shall
furnish an IDERA with respect to any Mortgaged Helicopter registered in a country other than the United States promptly
upon the request of the Administrative Agent; and
(B) If a Mortgaged Helicopter is subject to an Eligible Lease, the Borrower shall exercise all of its rights under such Lease to
cause and shall otherwise use commercially reasonable efforts to cause such Eligible Lessee to do or cause to be done any and
all acts and things which may be required or desirable (in the reasonable judgment of the Administrative Agent) to
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ensure that the Borrower or applicable Helicopter Owning Subsidiary shall have the full benefit of the Cape Town Treaty
and/or the Protocol in connection with such Mortgaged Helicopter and leased to such Eligible Lessee, including (but not
limited to) any matters connected with registering, perfecting, preserving and/or enhancing any international interest
constituted by the lease of the relevant aircraft object;
(xxx) Compliance with Material Agreements . Make all payments and otherwise perform all obligations in respect of all
agreements, contracts and other arrangements material to the business of any Security Party and to which such Security Party is a
party, and keep such agreements and contracts in full force and effect, except, in any case, where the failure to do so, either
individually or in the aggregate, would not constitute a Material Adverse Change in the Borrower (taking into account the
Borrower’s Subsidiaries as a whole);
(xxxi) Helicopter Registration . Each Helicopter Owning Subsidiary is qualified, and at all times shall be qualified, to own and
register its Mortgaged Helicopters in the United States and in any other Acceptable Jurisdiction in which such Mortgaged Helicopters
are registered;
(xxxii) Solvency . Each of the Security Parties is individually, and the Security Parties collectively are, solvent and will remain
solvent, so long as any part of the Credit Facility or any other amount due under this Agreement, the Notes or any Security
Documents shall remain unpaid, or any Lender shall have any Commitment hereunder;
(xxxiii) Reduction of Credit Facility . Immediately upon the successful placement of a Qualified Notes Offering, the Credit
Facility shall be permanently reduced by $150,000,000 and each Lender’s Commitment in respect of the Credit Facility shall be
permanently reduced pro rata in proportion to its respective interests in the Credit Facility; and
(xxxiv) Services Agreement . The Services Agreement shall be executed and effective before or on January 1, 2012;and
(xxxv) Mortgaged Helicopters . Any Helicopter owned by the Borrower or a Helicopter Owning Subsidiary that is registered or
operating in the United States shall be a Mortgaged Helicopter unless such Helicopter was acquired pursuant to an acquisition of a
company after the Closing Date, in which case such Helicopter shall become a Mortgaged Helicopter as provided in Section 10.1(b)
(xvi) hereof.
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(b) The Security Parties will not, without the prior written consent of the Lenders:
(i) Liens . Create, assume or permit to exist, or permit any of its Subsidiaries to create, assume or permit to exist, any Lien,
upon any of the properties or other assets of any thereof, except:
(A) liens for taxes not yet payable for which adequate reserves have been maintained;
(B) pledges or deposits to secure obligations under workmen’s compensation laws or similar legislation, deposits to secure
public or statutory obligations, warehousemen’s or other like liens, or deposits to obtain the release of such liens and deposits
to secure surety, appeal or customs bonds on which it or any Subsidiary is the principal, as to all of the foregoing, only to the
extent arising and continuing in the ordinary course of business;
(C) liens, charges and other encumbrances over such property or other assets (other than the Mortgaged Helicopters) of the
Borrower or any of the Helicopter Owning Subsidiaries, unless otherwise prohibited by Section 10.1(b)(xii);
(D) liens for carriers’ warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith
and by appropriate proceedings;
(E) any Eligible Lease or Lien on a Mortgaged Helicopter arising in connection with an Eligible Lease of such Mortgaged
Helicopter, which Lien is expressly permitted by such Eligible Lease to exist and which Lien the related Eligible Lessee is
ultimately obligated to remove;
(F) the Lien of the Security Agreement and/or Mortgage in favor of the Administrative Agent;
(G) the mortgages on the U.S. Bancorp Helicopters; and
(H) existing liens on Helicopters acquired pursuant to the terms of Section 10.1(b)(xvi).
(ii) Sale of Assets . Cease, or threaten to cease, its operations or viewed on a consolidated basis with its Subsidiaries, sell or
otherwise dispose of, or threaten to sell or otherwise dispose of, all or substantially all of the assets thereof, or all or substantially all
of such assets are seized or otherwise appropriated except for requisition for hire;
(iii) Dividends . On or prior to the first anniversary of the Closing Date, will not declare or pay any dividend, or distribution on,
or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, common shares of the Borrower, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower. After
the first anniversary of the Closing Date, dividends may be paid quarterly with respect to common shares provided that each of the
following conditions is met at the time of declaration and at the time of payment (and the Borrower shall have certified in writing to
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the Administrative Agent that such conditions are met and supplied to the Administrative Agent calculations to back-up such
conclusions): (x) the unaudited consolidated financial statements of the Borrower for the then fiscal quarter shall have been provided
to the Administrative Agent, (y) no Event of Default or breach of Sections 10.1(a)(xvi) through (xxi) has occurred and is continuing
or would occur as a consequence of the declaration or payment of a dividend or other payment contemplated in this Section 10.1(b)
(iii), and (z) such dividends payable in any fiscal year do not exceed 20% of the net income of the Borrower over the most recently
completed four fiscal quarters. Dividends may be paid quarterly with respect to the SEACOR Preferred Shares (if issued) at all times
provided that each of the following conditions is met at the time of declaration and at the time of payment (and the Borrower shall
have certified in writing to the Administrative Agent that such conditions are met and supplied to the Administrative Agent
calculations to back-up such conclusions): (x) the unaudited consolidated financial statements of the Borrower for the then fiscal
quarter shall have been provided to the Administrative Agent, (y) no Event of Default or breach of Sections 10.1(a)(xvi) through
(xxi) has occurred and is continuing or would occur as a consequence of the declaration or payment of a dividend or other payment
contemplated in this Section 10.1(b)(iii), and (z) at least US$50,000,000 will be available under the Credit Facility after such
payments are made;
(iv) Limitations on Ability to Make Distributions . Create or otherwise cause to permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary (other than a Subsidiary acquired after the Closing Date
pursuant to the terms of Section 10.1(b)(xvi) to (a) pay dividends or make any other distributions on its capital stock or limited
liability company interests, as the case may be, to the Borrower or any Subsidiary or pay any Indebtedness owed to the Borrower,
(b) make any loans or advances to the Borrower, or (c) transfer any of its property or assets to the Borrower other than any such
encumbrance or restriction agreed to by (i) any Helicopter Owning Subsidiary incurring Secured Debt permitted hereunder to the
extent such Secured Debt is incurred in connection with the acquisition or refinancing of its Mortgaged Helicopters or (ii) any
Subsidiary party to any Joint Venture in respect of a restriction referred to in sub-clause (c) above or (iii) any Subsidiary party to any
Joint Venture to the extent such Joint Venture incurs Indebtedness, but only to the extent the parties to such Joint Venture are
required to agree to any such restrictions;
(v) Changes in Business . Change or permit any of the Subsidiaries to change, the nature of its business or commence any other
business not reasonably related to environmental services, energy services, aviation services or related businesses;
(vi) Consolidation, Merger . Consolidate with, or merge into, or agree to merge or become consolidated with, or merge into any
corporation or lease in one or more transactions all or substantially all of its assets to any other person; provided , that that the
Borrower can merge into, or agree to merge or become consolidated with any corporation so long as the Borrower is the surviving
entity, any Subsidiary can merge into, or agree to merge or consolidate with any other Subsidiary and any Subsidiary can merge into,
or agree to merge or become consolidated with the Borrower) so long as:
(A) the surviving entity is organized, existing and in good standing under the Applicable Laws of the United States, any State
of the United States or the District of Columbia and, upon consummation of such transaction, such person will be a U.S. Air
Carrier;
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(B) the surviving entity executes and delivers to Administrative Agent a duly authorized, legal, valid, binding and enforceable
agreement, reasonably satisfactory in form and substance to Administrative Agent, containing an effective assumption by
such person of the due and punctual performance and observance of each covenant, agreement and condition in this
Agreement and the Security Documents to be performed or observed by Borrower and confirmation that each representation
and warranty of each Secured Party will be true immediately following the effectiveness of such merger or consolidation;
(C) if the Mortgaged Helicopters are, at the time, registered with the FAA, such person makes such filings and recordings
with the FAA pursuant to the Act or if any Mortgaged Helicopter is, at the time, not registered with FAA, the surviving entity
makes such filings and recordings with the applicable Aviation Authority as shall be necessary to evidence such consolidation
or merger; and
(D) immediately after giving effect to such consolidation or merger no Event of Default shall have occurred and be continuing
(or which occur with the passage of time, notice or both);
(vii) Use of Proceeds . Use the proceeds of the Credit Facility in violation of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time;
(viii) Redemption/Repurchase of Securities . Redeem or repurchase any of its outstanding convertible subordinated bonds or
any class of its capital stock now or hereafter outstanding, unless after giving effect to any such redemption or repurchase it is in
compliance with its covenants hereunder and no Event of Default shall have occurred and be continuing and notification of any such
redemption or repurchase shall be included in the next quarterly Compliance Certificate delivered to the Agent;
(ix) No Money Laundering . In connection with this Agreement, contravene any law, official requirement or other regulatory
measure or procedure implemented to combat “money laundering” (as defined in Article 1 of the Directive (2005/60/EC) of the
Council of the European Communities);
(x) Limitation on Investments in Joint Ventures . Make, and will not permit any Subsidiary to make, any Investment in any
Joint Venture except, in the absence of an Event of Default, the Borrower and any Subsidiary may make any Investment in any Joint
Venture on any date, if, immediately after giving effect to such Investment, the aggregate book value of all Investments made by the
Borrower and its Subsidiaries would not exceed fifteen percent (15%) of the Borrower’s Tangible Net Assets based on the most
recent financial statements of the Borrower required to be provided pursuant to Section 10.1(a)(vi); provided , however , that at the
time of such Investment and immediately after giving effect thereto the Borrower shall be in compliance with all provisions in
Section 10.1;
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(xi) Limitation on Indebtedness . Incur, and shall procure that the Subsidiaries will not incur, any Indebtedness, except:
(A) Indebtedness under this Agreement;
(B) existing Indebtedness as set forth in Schedule D attached hereto (including existing operating leases), and the renewals of
such Indebtedness as long as there is no resulting increase in Indebtedness;
(C) Indebtedness under interest rate, foreign exchange or derivatives transactions entered into in the ordinary course of
business;
(D) Indebtedness under performance guarantees and standby letters of credit entered into in the ordinary course of business;
(E) issuance by the Borrower of unsecured Indebtedness that has a final maturity date after the Termination Date;
(F) Indebtedness incurred in connection with an acquisition permitted hereunder;
(G) existing Indebtedness of a Subsidiary acquired after the Closing Date pursuant to the terms of Section 10.1(b)(xvi); and
(H) all other Indebtedness provided that the incurrence of such Indebtedness does not breach any of the covenants in
Section 10.1;
(xii) Negative Pledge . Other than with respect to the existing pledges of any Subsidiary that is acquired after the Closing Date
pursuant to the terms of Section 10.1(b)(xvi), sell, encumber or otherwise transfer, or permit any Subsidiary to sell, encumber or
otherwise transfer, any of its assets or property, including but not limited to the Helicopters (other than the US Bancorp Helicopters),
or any of the right, title or interest of any thereof therein, assign, pledge or otherwise encumber any earnings of, insurances covering
or requisition compensation in respect of, any of its assets or property, including but not limited to the Helicopters (other than the US
Bancorp Helicopters), or sell, assign, pledge or otherwise transfer or encumber any of the shares of stock of any of the Subsidiaries
directly or indirectly legally or beneficially owned by the Borrower, unless after giving effect to any such sale, assignment, pledge,
transfer or other encumbrance, the Borrower is in compliance with Sections 10.1(a)(xvi) through (xxi) and its other covenants and no
Event of Default shall have occurred and be continuing;
(xiii) Transactions with Affiliates . Sell, lease, transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from or otherwise engage in any other transactions with, any of its Affiliates, except (i) in the ordinary course of
business at prices and on terms and conditions not less favorable to such Security Party than could be obtained on an arm’s length
basis from unrelated third parties, and (ii) transactions between or among the Borrower and the Guarantors not involving any other
Affiliate;
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(xiv) Accounting Changes; Organizational Documents . (a) Change its fiscal year end, or make (without the consent of the
Administrative Agent) any material change in its accounting treatment and reporting practices except as required by GAAP,
(b) amend, modify or change its articles of incorporation (or corporate charter or other similar organizational documents) or amend,
modify or change its bylaws (or other similar documents) in any manner materially adverse to the rights or interests of the Creditors
or (c) change its organization form or its jurisdiction of organization;
(xv) No Change of Control . There shall be no Change of Control of the Borrower or any other Security Party; and
(xvi) Limitations on Acquisitions . Acquire capital stock or other equity interests in other companies provided , however , that
an acquisition shall be permitted if the Borrower is and shall continue to be in compliance with Sections 10.1(a)(xvi) through (xxi). If
an acquisition results in a Subsidiary of the Borrower owning Helicopters that are subject to mortgages in favor of certain lenders
(other than the Lenders), the value of which exceeds 30% of the net book value (determined in accordance with GAAP) of all
Helicopters owned by the Borrower and its Subsidiaries (including those acquired in such acquisition), then within one year after the
acquisition is effected, the Borrower shall secure releases of such mortgages such that the value of Helicopters that are owned by the
Borrower and its Subsidiaries and are subject to mortgages in favor of certain lenders (other than the Lenders) shall not exceed 30%
of the net book value (determined in accordance with GAAP) of all of Helicopters owned by the Borrower and its Subsidiaries.
10.2. Helicopter Covenants . Each of the Secured Parties hereby covenants and undertakes with the Agents and the Lenders that, from the
date hereof and so long as (x) any commitments to advance credit herein remain in effect or (y) any principal, interest or other moneys are owing
in respect of the Credit Facility or otherwise owing under this Agreement or under the Notes:
(a) Possession, Operation, and Use, Maintenance, Registration and Markings .
(i) General . Except as otherwise expressly provided herein, the Borrower and the applicable Helicopter Owning Subsidiary
shall be entitled to operate, use, locate, employ or otherwise utilize or not utilize the Mortgaged Helicopters, Engines or any Parts in
any lawful manner or place in accordance with the Borrower’s or applicable Helicopter Owning Subsidiary’s business judgment;
(ii) Possession . The Borrower and the applicable Helicopter Owning Subsidiary, without the prior consent of the
Administrative Agent, shall not lease or otherwise in any manner deliver, transfer or relinquish possession of any Mortgaged
Helicopter; except that the Borrower and the applicable Helicopter Owning Subsidiary may, without such prior written consent of the
Administrative Agent:
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(A) Deliver or permit any Eligible Lessee to deliver possession of a Mortgaged Helicopter or any Part (x) to the manufacturer
thereof or to any third-party maintenance provider for testing, service, repair, maintenance or overhaul work on such
Mortgaged Helicopter or any Part, or, to the extent required or permitted by Section 10.2(c) hereof, for alterations or
modifications in or additions to such Mortgaged Helicopter or (y) to any Person for the purpose of transport to a Person
referred to in the preceding clause (x);
(B) Enter into a charter or other similar arrangement with respect to a Mortgaged Helicopter (which shall not be considered a
transfer of possession hereunder); provided that the Borrower’s obligations hereunder shall continue in full force and effect
notwithstanding any such charter or other similar arrangement;
(C) So long as no Event of Default shall have occurred and be continuing, and subject to the provisions of the immediately
following paragraph, enter into an Eligible Lease with respect to a Mortgaged Helicopter to any Eligible Lessee; provided
that , Borrower or the applicable Helicopter Owning Subsidiary shall have furnished Administrative Agent (I) a copy of such
Eligible Lease; and (II) such information as the Administrative Agent may reasonably require to verify that the lessee is an
Eligible Lessee and the lease is an Eligible Lease;
provided that (1) the rights of any transferee who receives possession by reason of a transfer permitted by any of clauses (a) or (c) of this
Section 10.2(a)(ii) shall be subject and subordinate to all the terms of this Agreement, (2) the Borrower shall remain primarily liable for the
performance of all of the terms of this Agreement and all the terms and conditions of this Agreement and the other Security Documents
shall remain in effect and (3) no lease or transfer of possession otherwise in compliance with this Section 10.2(a)(ii) shall (x) result in any
registration or re-registration of an Aircraft, except to the extent permitted by Section 10.2(a)(v) or the maintenance, operation or use
thereof except in compliance with Sections 10.2(a)(iii) and 10.2(a)(iv) or (y) permit any action not permitted to the Borrower hereunder.
In the case of any Eligible Lease permitted under this Section 10.2(a)(ii), (w) Borrower shall provide written notice to Administrative
Agent; (x) Borrower shall furnish to Mortgagee evidence reasonably satisfactory to Mortgagee that the insurance required by Section 10.1
(a)(xiv) remains in effect; (y) all necessary documents shall have been duly filed, registered or recorded in such public offices as may be
required fully to preserve the first priority security interest and International Interest (subject to Permitted Liens) of Administrative Agent
in each Mortgaged Helicopter; and (z) Borrower shall reimburse Administrative Agent for all of its reasonable out-of-pocket fees and
expenses, including, without limitation, reasonable fees and disbursements of counsel, incurred by Administrative Agent in connection
with any such lease. Except as otherwise provided herein and without in any way relieving the Borrower from its primary obligation for the
performance of its obligations under this Agreement, the Borrower may in its sole discretion permit a lessee to exercise any or all rights
which the Borrower would be
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entitled to exercise under Sections 10.2(a) and 10.2(c), and may cause a lessee to perform any or all of the Borrower’s obligations under
Section 10.2, and the Administrative Agent agrees to accept actual and full performance thereof by a lessee in lieu of performance by the
Borrower.
(iii) Operation and Use . So long as the Mortgaged Helicopters are serving as Collateral, the Borrower or the applicable
Helicopter Owning Subsidiary shall not operate, use or locate any Mortgaged Helicopter, or allow any Mortgaged Helicopter to be
operated, used or located, (i) in any area excluded from coverage by any insurance required by the terms of Section 10.1(a)(xiv), or
(ii) in any recognized area of hostilities unless covered in accordance with Section 10.1(a)(xiv) by war risk insurance, or (iii) in any
jurisdiction other than the United States or, if registered in another Acceptable Jurisdiction as permitted hereby, in such Acceptable
Jurisdiction. So long as the Mortgaged Helicopters are subject to the Lien in favor of the Administrative Agent, the Borrower and
related Helicopter Owning Subsidiary shall not permit any Mortgaged Helicopter to be used, operated, maintained, serviced, repaired
or overhauled (x) in violation of any Applicable Law binding on or applicable to such Mortgaged Helicopters or (y) in violation of
any airworthiness certificate, license or registration of any State of Registration relating to such Mortgaged Helicopters.
(iv) Maintenance and Repair . So long as the Mortgaged Helicopters are serving as Collateral, the Borrower and related
Helicopter Owning Subsidiary shall cause each Mortgaged Helicopter to be maintained, serviced, repaired and overhauled in
accordance with (i) maintenance standards required by, or substantially equivalent to those required by, the FAA or the Aviation
Authority in any other Acceptable Jurisdiction in which such Mortgaged Helicopter is registered for Helicopters of the same type, so
as to (A) keep each Mortgaged Helicopter in as good operating condition as on the date hereof, ordinary wear and tear excepted,
(B) keep each Mortgaged Helicopter in such operating condition as may be necessary to enable the applicable airworthiness
certification of such Mortgaged Helicopter to be maintained under the regulations of the FAA or other Aviation Authority then
having jurisdiction over the operation of such Mortgaged Helicopter, and (C) to keep all manufacturer’s warranties in effect unless
such Mortgaged Helicopter is subject to a power by the hour agreement; and (ii) at least at the same standards as Borrower uses with
respect to similar Helicopters of similar size in its fleet operated by Borrower in similar circumstances. Borrower further agrees that
the Mortgaged Helicopters will be maintained, used, serviced, repaired, overhauled or inspected in compliance with Applicable Laws
with respect to the maintenance of such Mortgaged Helicopters and in compliance with each applicable airworthiness certificate,
license and registration relating to each Mortgaged Helicopter issued by the Aviation Authority. The Borrower shall maintain or
cause to be maintained the Helicopter Related Documents and Records in the English language.
(v) Registration . The Borrower on or prior to the date hereof shall cause each Mortgaged Helicopter to be duly registered in its
name or in the name of the applicable Helicopter Owning Subsidiary under the Act and except as otherwise permitted by this
Section 10.2(a)(v) at all times thereafter shall cause each Mortgaged Helicopter to remain so registered. So long as no Event of
Default shall have occurred and be continuing, Borrower may, by written notice to Administrative Agent, request to change
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the State of Registration of a Mortgaged Helicopter. Any such change in registration shall be effected only in compliance with, and
subject to all of the conditions set forth in, Section 10.1(a)(xxvii) of this Agreement as fully as if it were a new Helicopter referred to
in Section 10.1(a)(xxvii). Unless the Termination Date has occurred and all amounts owing under this Agreement and under the
Notes have been paid in full, Borrower shall also cause Mortgages to be duly recorded and at all times maintained of record as a firstpriority perfected mortgage (subject to Permitted Liens) on the Mortgaged Helicopters. Unless the Lien in favor of the
Administrative Agent has been discharged, Borrower shall cause the International Interest granted under this Agreement in favor of
the Administrative Agent in each Mortgaged Helicopter to be registered on the International Registry as an International Interest on
such Mortgaged Helicopter, subject to the Administrative Agent providing its consent to the International Registry with respect
thereto.
(vi) Markings . If permitted by Applicable Law, the Borrower will cause to be affixed to, and maintained in, the cockpit of each
Mortgaged Helicopter that is not registered in the United States, in a clearly visible location, a placard of a reasonable size and shape
bearing the legend: “Subject to a security interest in favor of Wells Fargo Bank, National Association, as Administrative Agent.”
Such placards may be removed temporarily, if necessary, in the course of maintenance of such Mortgaged Helicopters. If any such
placard is damaged or becomes illegible, Borrower shall promptly replace it with a placard complying with the requirements of this
Section.
(b) Inspection .
(i) At all reasonable times, so long as the Mortgaged Helicopters are serving as Collateral, Administrative Agent and/or its
authorized representatives (the “Inspecting Parties”) may (not more than once every 12 months unless an Event of Default has
occurred and is continuing then such inspection right shall not be so limited) inspect the Mortgaged Helicopters (including without
limitation, the Helicopter Related Documents and Records)
(ii) No such inspection shall interfere with Borrower’s, the applicable Helicopter Owning Subsidiary’s or any Eligible Lessee’s
maintenance and operation of such Mortgaged Helicopter.
(iii) With respect to such rights of inspection, Administrative Agent shall not have any duty or liability to make, or any duty or
liability by reason of making or not making, any such visit, inspection or survey.
(iv) Each Inspecting Party shall bear its own expenses in connection with any such inspection (including the cost of any copies
made in accordance with Section 10.2(b)(i)).
(c) Replacement and Pooling of Parts, Alterations, Modifications and Additions; Substitution of Engines .
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(i) Replacement of Parts . Except as otherwise provided herein, so long as the Mortgaged Helicopters are serving as Collateral,
Borrower, at its own cost and expense, will, or will cause the applicable Helicopter Owning Subsidiary or an Eligible Lessee to, at its
own cost and expense, promptly replace (or cause to be replaced) all Parts which may from time to time be incorporated or installed
in or attached to any Mortgaged Helicopter and which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever, provided, however, that neither
the Borrower, any Helicopter Owning Subsidiary or an Eligible Lessee shall be obligated to replace any Part which, in the reasonable
judgment of the Borrower, is no longer necessary for the operation of the Mortgaged Helicopter. In addition, Borrower may, at its
own cost and expense, or may permit the applicable Helicopter Owning Subsidiary or an Eligible Lessee at its own cost and expense
to, remove (or cause to be removed) in the ordinary course of maintenance, service, repair, overhaul or testing any Parts, whether or
not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use; provided ,
however , that Borrower, except as otherwise provided herein, at its own cost and expense, will, or will cause the applicable
Helicopter Owning Subsidiary or an Eligible Lessee at its own cost and expense to, replace such Parts as promptly as practicable. All
replacement parts shall be free and clear of all Liens, except for Permitted Liens (and except in the case of replacement property
temporarily installed on an emergency basis) and shall be in good operating condition and have a value and utility not less than the
value and utility of the Parts replaced (assuming such replaced Parts were in the condition required hereunder).
(ii) Parts . Except as otherwise provided herein, any Part at any time removed from any Mortgaged Helicopter shall remain
subject to the Lien in favor of the Administrative Agent, no matter where located, until such time as such Part shall be replaced by a
part that has been incorporated or installed in or attached to such Mortgaged Helicopter and that meets the requirements for
replacement parts specified above. Immediately upon any replacement part becoming incorporated or installed in or attached to such
Mortgaged Helicopter as provided in Section 10.2(c)(i), without further act, (i) the replaced Part shall thereupon be free and clear of
all rights of the Administrative Agent and shall no longer be deemed a Part hereunder, and (ii) such replacement part shall become a
Part subject to this Agreement and be deemed part of such Mortgaged Helicopter, for all purposes hereof to the same extent as the
Parts originally incorporated or installed in or attached to such Mortgaged Helicopter.
(iii) Alterations, Modifications and Additions . The Borrower (or the applicable Helicopter Owning Subsidiary) shall, or shall
cause an Eligible Lessee to, make (or cause to be made) alterations and modifications in and additions to each Mortgaged Helicopter
as may be required to be made from time to time to meet the applicable standards of the FAA or any other Aviation Authority having
jurisdiction over the operation of such Mortgaged Helicopter, to the extent made mandatory in respect of such Mortgaged Helicopter
(a “Mandatory Modification”). In addition, the Borrower or the applicable Helicopter Owning Subsidiary, at its own expense, may,
or may permit an Eligible Lessee at its own cost and expense to, from time to time make or cause to be made such alterations and
modifications in and additions to any Mortgaged Helicopter (each an “Optional Modification”) as the Borrower, the applicable
Helicopter Owning Subsidiary or such Eligible Lessee may deem desirable in the proper conduct of its business including,
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without limitation, removal of Parts which Borrower deems are obsolete or no longer suitable or appropriate for use in such
Mortgaged Helicopter; provided , however , that no such Optional Modification shall (i) materially diminish the Fair Market Value,
utility, or useful life of any Mortgaged Helicopter below its Fair Market Value, utility or useful life immediately prior to such
Optional Modification (assuming such Mortgaged Helicopter was in the condition required by this Agreement immediately prior to
such Optional Modification) or (ii) cause any Mortgaged Helicopter to cease to have the applicable standard certificate of
airworthiness except in limited circumstances solely for temporary experimental purposes. All Parts incorporated or installed in or
attached to any Mortgaged Helicopter as the result of any alteration, modification or addition effected by the Borrower shall be free
and clear of any Liens except Permitted Liens and become subject to the Lien in favor of the Administrative Agent; provided that the
Borrower, the applicable Helicopter Owning Subsidiary or any Eligible Lessee may, at any time so long as a Mortgaged Helicopter is
subject to the Lien in favor of the Administrative Agent, remove any such Part (such Part being referred to herein as a “ Removable
Part ”) from such Mortgaged Helicopter if (i) such Part is in addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Mortgaged Helicopter at the time of delivery thereof hereunder or any Part
in replacement of, or in substitution for, any such original Part, (ii) such Part is not required to be incorporated or installed in or
attached or added to such Mortgaged Helicopter pursuant to the terms of Section 10.2(c)(ii) or the first sentence of this Section 10.2
(c)(iii), and (iii) such Part can be removed from such Mortgaged Helicopter without materially diminishing its Fair Market Value,
utility or remaining useful life which such Mortgaged Helicopter would have had at the time of removal had such removal not been
effected by the Borrower, assuming the Mortgaged Helicopter was otherwise maintained in the condition required by this Agreement
and such Removable Part had not been incorporated or installed in or attached to such Mortgaged Helicopter. Upon the removal by
the Borrower of any such Part as above provided, title thereto shall, without further act, be free and clear of all rights of the
Administrative Agent and such Part shall no longer be deemed a Part hereunder.
(d) Loss, Destruction or Requisition .
(i) Event of Loss With Respect to the Airframe . Upon the occurrence of an Event of Loss with respect to a Mortgaged
Helicopter, the Borrower shall comply with the requirements set forth in Sections 5.3 and 10.1(a)(xiv)(D) of this Agreement.
(ii) Non-Insurance Payments Received on Account of an Event of Loss . Any amounts, other than insurance proceeds in respect
of damage or loss not constituting an Event of Loss, received at any time by the Administrative Agent or the Borrower from any
government entity or any other Person in respect of any Event of Loss will be applied in prepayment of the Credit Facility to the
extent (but only to the extent) such prepayment is required in order for the Borrower to continue to comply with the covenants in
Sections 10.1(a)(xvi) through (xxi) of this Agreement. Any such prepayment shall be made together with interest thereon,
breakfunding costs and the costs and expenses provided for in Section 14.5.
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(iii) Requisition for Use . In the event of a requisition for use by any Government Entity (except a United States Government
Entity) or the requisition of title by any Government Entity of a Mortgaged Helicopters, the Borrower shall promptly notify the
Administrative Agent of such requisition and all of the Borrower’s obligations under this Agreement, including those set forth in
Sections 10.1(a)(xvi) to (xxi) shall continue to the same extent as if such requisition had not occurred. Any payments received by the
Administrative Agent or the Borrower (or the applicable Helicopter Owning Subsidiary) or Eligible Lessee from such Government
Entity with respect to such requisition of use shall be applied in prepayment of the Credit Facility to the extent (but only to the
extent) such prepayment is required in order for the Borrower to continue to comply with the covenants in Sections 10.1(a)(xvi)
through (xxi) of this Agreement. In the event of an Event of Loss of an Engine resulting from the requisition for use by a non-US
Government Entity of such Engine (but not the Airframe), the Owner will replace such Engine hereunder and any payments received
by the Administrative Agent or the Borrower from such Government Entity with respect to such requisition shall be applied in
prepayment of the Credit Facility to the extent (but only to the extent) such prepayment is required in order for the Borrower to
continue to comply with the covenants in Sections 10.1(a)(xvi) through (xxi) of this Agreement.
SECTION 11. ASSIGNMENT AND PARTICIPATIONS
(a) This Agreement shall be binding upon, and inure to the benefit of, the Security Parties, each of the Agents and the Lenders and
their respective successors and assigns, except that the Borrower may not assign any of its rights or obligations hereunder without the prior
written consent of the Lenders. In giving any consent as aforesaid to any assignment by the Borrower, the Lenders shall be entitled to
impose such conditions as they shall deem advisable. If no Event of Default has occurred and is continuing, any Lender shall be entitled to
assign the whole or any part of its rights or obligations under this Agreement or grant participation(s) in the Credit Facility to any Eligible
Assignee with the prior written consent (in each case not to be unreasonably withheld or delayed) of the Borrower and, in the case of
assignments, the Administrative Agent. Notwithstanding the foregoing, if the Borrower does not provide its prior written consent or object
to the assignment or participation, as the case may be, within ten (10) days after receiving notice of such assignment or participation, the
Borrower shall be deemed to have given its consent to such assignment or participation. If an Event of Default has occurred and is
continuing, any Lender shall be entitled to assign the whole or any part of its rights or obligations under this Agreement or grant
participation(s) in the Credit Facility to any Eligible Assignee or to any private equity fund, hedge fund, investor partnership, financial
institution, special purpose entity, funding vehicle, insurance company or any other entity acceptable to such Lender provided that (i) such
assignee is not a competitor or an Affiliate of a competitor of the Borrower and (ii) the Administrative Agent has provided its prior written
consent to such assignment (such consent not to be unreasonably withheld). Such Lender shall forthwith give notice of any such
assignment or participation to the Administrative Agent and the Borrower, provided , however , that (a) any such assignment or
participation shall be in a minimum amount of Ten Million Dollars ($10,000,000), (b) any such assignment to a Lender is to be made
pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit 5 hereto (such Assignment and Assumption
Agreement to be delivered to the Administrative Agent, for its acceptance and recording in the Register), and (c) except as provided in
Section 14, no such assignment or participation will result in any additional costs to, or additional material requirements on, the Borrower.
The Borrower will take all reasonable actions requested by the
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Lenders to effect such assignment, including, without limitation, the execution of a written consent to such Assignment and Assumption
Agreement. Anything contained in this Section 11 to the contrary notwithstanding, any Lender may at any time pledge all or any portion of
its interest and rights under this Agreement (including all or any portion of any Notes) to any of the twelve Federal Reserve Banks
organized under §4 of the Federal Reserve Act, 12 U.S.C. §341. No such pledge or the enforcement thereof shall release the pledgor
Lender from its obligations hereunder.
(b) The Administrative Agent shall maintain at its address referred to in Section 17, a copy of each Assignment and Assumption
Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loan owing to, each Lender, and payments of interest, principal, and other amounts paid by
a Security Party, from time to time (the “ Register ”). The entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the other Security Parties and the Creditors may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement, the Notes and the Security Documents. The Register shall be available
for inspection by Borrower, the other Security Parties or the Creditors at any reasonable time and from time to time upon reasonable prior
notice.
SECTION 12. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
12.1. Illegality . In the event that by reason of any change in any applicable law, regulation or regulatory requirement or in the
interpretation thereof a Lender has a reasonable basis to conclude that it has become unlawful for such Lender to maintain or give effect to its
obligations as contemplated by this Agreement, the Lender shall inform the Borrower and the Administrative Agent to that effect, whereafter the
liability of such Lender to make its Commitment available shall forthwith cease and the Borrower shall be required either to prepay to such
Lender any portion of the then outstanding Advances owing to such Lender immediately or, if such Lender so agrees, to prepay such portion of
the outstanding Advances to such Lender on the last day of the then current Interest Period or Periods, in accordance with and subject to the
provisions of Section 12.6 and to pay to the Administrative Agent sufficient amounts of cash to fund any possible drawings under Letters of
Credit then in existence, such amounts to be repaid to the Borrower to the extent not utilized to cover Letter of Credit drawings. In any such
event, but without prejudice to the aforesaid obligations of the Borrower to prepay the outstanding Advances or part thereof and fund any
possible drawings under Letters of Credit then in existence, the Borrower and such Lender shall negotiate in good faith with a view to agreeing
on terms for making the Commitment available from another jurisdiction or otherwise restructuring the Commitment on a basis which is not
unlawful.
12.2. Increased Cost . If any change in applicable law, regulation or regulatory requirement, any guideline, request or directive by any
central bank or any governmental or other authority or in the interpretation or application thereof by any governmental or other authority, shall:
(a) subject a Lender to any Taxes with respect to its income from the Credit Facility or any part thereof, or
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(b) change the basis of taxation to a Lender of payments of principal or interest or any other payment due or to become due pursuant
to this Agreement (other than a change in the basis effected by the jurisdiction of incorporation of such Lender or the domicile of the
Lender’s office through which the Lender’s Commitment is made or any governmental subdivision or other taxing authority having
jurisdiction over such Lender (unless such jurisdiction is asserted solely by reason of the activities of the Borrower or any of the
Subsidiaries) or such other jurisdiction where the Credit Facility may be payable), or
(c) impose, modify or deem applicable any reserve requirements or require the making of any special deposits against or in respect of
any assets or liabilities of, deposits with or for the account of, or loans by, any Lender, or
(d) impose on any Lender any other condition affecting the Commitment or any portion of any Advance thereunder, and the result of
the foregoing is either to increase the cost to such Lender of making available or maintaining its Commitment or to reduce the amount of
any payment received by such Lender,
then and in any such case if such increase or reduction in the opinion of such Lender materially affects the interests of such Lender
under or in connection with this Agreement:
(i) such Lender shall notify the Borrower and the Administrative Agent of the happening of such event,
(ii) the Borrower agrees forthwith upon demand to pay to such Lender such amount as such Lender certifies to be necessary to
compensate such Lender for such additional cost or such reduction, and
(iii) any such demand as is referred to in this Section 12.2 may be made by such Lender at any time before or after any
repayment of the Advances.
For the avoidance of doubt, this Section 12.2 shall apply to all requests, rules, guidelines or directives concerning liquidity and capital
adequacy issued by any United States regulatory authority (i) under or in connection with the implementation of the Dodd-Frank Wall Street
Reform and Consumer Protection Act and (ii) in connection with the implementation of the recommendations of the Bank for International
Settlements or the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority), regardless of the
date adopted, issued, promulgated or implemented.
12.3. Replacement of Lender or Participant . If the obligation of any Lender to make its pro rata share of any Advance has been suspended
or terminated pursuant to Section 12.1, or if any Lender shall notify the Borrower of the happening of any event leading to increased costs as
described in Section 12.2, the Borrower shall have the right, upon twenty (20) Banking Days’ prior written notice to such Lender, to cause one or
more banks (a “Replacement Lender (s)”) (which may be one or more of the Lenders), each such Replacement Lender to be satisfactory to the
Majority Lenders (determined for this purpose as if such transferor Lender had no Commitment and held no interest in the Note issued to it
hereunder) and, in each case, with the written acknowledgment of the Administrative Agent, to purchase such Lender’s pro rata share of the
Advances and the Letters of Credit and assume the Commitment of such Lender and such Lender’s interests in any outstanding Letters of Credit
pursuant to an Assignment and Assumption
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Agreement. If one or more such banks are identified by the Borrower and approved as being reasonably satisfactory to the Majority Lenders
(determined as provided above), the transferor Lender shall consent to such sale and assumption by executing and delivering an Assignment and
Assumption Agreement. Upon the execution and delivery of an Assignment and Assumption Agreement by the Borrower, the transferor Lender,
the Replacement Lender and the Administrative Agent, and payment by the Replacement Lender to the transferor Lender of an amount equal to
the transferor Lender’s pro rata share of outstanding Advances and interest thereon and any fees and expenses owing thereto , such Replacement
Lender shall become a Lender and Letter of Credit Issuer (as applicable) party to this Agreement (if it is not already a party hereto as applicable)
and shall have all the rights and obligations of a Lender with a Commitment (which, if such Replacement Lender is already a party hereto, shall
take into account such Replacement Lender’s then existing Commitment hereunder) and of a Letter of Credit Issuer as set forth in such
Assignment and Assumption Agreement and the transferor Lender shall be released from its obligations hereunder and no further consent or
action by any other Person shall be required. In the event no Replacement Lender is found or is satisfactory to the Majority Lenders, the
Borrower shall have the right to request a permanent reduction of the Committed Amount by reducing the whole of such Lender’s Commitment,
provided that (a) the Administrative Agent and the Lender whose Commitment the Borrower seeks to reduce receive ten (10) Banking Days
prior written notice of such request and (b) such reduction occurs on the last day of the applicable Interest Period(s) for Advances (or portions
thereof) outstanding under this Agreement. Upon such reduction, the reduced Lender shall be released from its obligations hereunder and no
further action by any Person shall be required and the new participation percentages, including those relating to Letters of Credit (as designated
in Schedule A hereto) shall be assigned to the remaining Lenders on a pro rata basis based on their respective Commitments. In the event that the
Administrative Agent, in its capacity as a Lender, is required to sell its pro rata share of the Advances and its Commitment hereunder pursuant to
this Section 12.3, the Administrative Agent shall, promptly upon the consummation of any assignment pursuant to this Section 12.3, resign as
Administrative Agent hereunder and the Borrower shall (subject to the consent of the Majority Lenders) have the right to appoint another Agent
as successor Administrative Agent, all in accordance with Section 16.13.
12.4. Non-availability of Funds . If the Administrative Agent shall determine that, by reason of circumstances affecting the London
Interbank Market generally, adequate and reasonable means do not or will not exist for ascertaining the Applicable Rate for any Interest Period,
the Administrative Agent shall give notice of such determination to the Borrower. The Borrower and the Lenders shall then negotiate in good
faith in order to agree upon a mutually agreeable basis for funding the Advance or Advances in question, and/or for determining the interest rate
and/or Interest Period(s) to be substituted for those which would otherwise have applied under this Agreement. If the Borrower and the Lenders
are unable to agree upon such a substituted funding base, interest rate and/or Interest Period(s) within thirty (30) days of the giving of such
notice, the Borrower shall repay the Credit Facility, or the relevant portion thereof, as the case may be, to the Lenders immediately; provided ,
however , that if the Borrower fails to make such repayment, the Lenders shall determine a funding basis, set an interest rate and/or set an
Interest Period(s), as the case may be, all to take effect from the expiration of the relevant Interest Period(s) in effect at the date of said
determination notice, which rate shall be equal to the aggregate of the Margin and the cost to the Lenders of funding the relevant Advance or
Advances.
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12.5. Determination of Losses . A certificate or determination notice of the Agents and the Lenders as to any of the matters referred to in
this Section 12, absent manifest error, shall be conclusive and binding on the Borrower.
12.6. Compensation for Losses . Where the Advances are to be prepaid by the Borrower pursuant to Section 12, the Borrower agrees
simultaneously with such prepayment to pay to the relevant Lender all accrued interest to the date of actual payment and all other sums payable
by the Borrower to such Lender pursuant to this Agreement, together with such amounts as may be certified by such Lender to be necessary to
compensate such Lender for any actual loss, premium or penalties incurred or to be incurred by it on account of funds borrowed to make, fund or
maintain its Commitment for the remainder (if any) of the then current Interest Period or Periods, if any, but otherwise without penalty or
premium.
SECTION 13. CURRENCY INDEMNITY
13.1. Currency Conversion . If for the purpose of obtaining or enforcing a judgment in any court in any country it becomes necessary to
convert into any other currency (the “judgment currency”) an amount due in Dollars under this Agreement or under the Notes, then the
conversion shall be made, in the discretion of the Administrative Agent, at the rate of exchange prevailing either on the date of default or on the
day before the day on which the judgment is given or the order for enforcement is made, as the case may be (the “conversion date”), provided
that the Administrative Agent shall not be entitled to recover under this section any amount in the judgment currency which exceeds at the
conversion date the amount in Dollars due under this Agreement and/or under the Notes.
13.2. Change in Exchange Rate . If there is a change in the rate of exchange prevailing between the conversion date and the date of actual
payment of the amount due, the Borrower shall pay such additional amounts (if any, but in any event not a lesser amount) as may be necessary to
ensure that the amount paid in the judgment currency when converted at the rate of exchange prevailing on the date of payment will produce the
amount then due under this Agreement and/or under the Notes in Dollars; any excess over the amount due received or collected by the Lenders
shall be remitted to the Borrower.
13.3. Additional Debt Due . Any amount due from the Borrower under Section 13.2 shall be due as a separate debt and shall not be
affected by judgment being obtained for any other sums due under or in respect of this Agreement and/or under or in respect of the Notes.
13.4. Rate of Exchange . The term “rate of exchange” in this Section 13 means the rate at which the Administrative Agent in accordance
with its normal practices is able on the relevant date to purchase Dollars with the judgment currency and includes any premium and costs of
exchange payable in connection with such purchase.
SECTION 14. FEES AND EXPENSES
14.1. Commitment Fee . (a) The Borrower shall pay to the Administrative Agent, for distribution to the Lenders, a commitment fee,
payable quarterly in arrears, computed at the Commitment Fee Rate on the average unfunded portion of the Committed Amount during such
quarter. The commitment fee shall accrue from the date hereof and shall terminate on the Termination Date. Such commitment fee shall be
calculated on the basis of actual days elapsed over a 360 day year.
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14.2. Letter of Credit and Facing Fees and Related Charges . The Borrower also agrees to pay to the Letter of Credit Issuer all customary
issuing and handling fees of the Letter of Credit Issuer in connection with its issuance of Letters of Credit. The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee (the “Letter of Credit Fee”) with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Margin used to determine the interest rate applicable to LIBOR Advances on the average daily
amount of such Lender’s pro rata participation in Letters of Credit, (ii) to the Issuing Lender a fronting fee (the “Facing Fee”), which shall equal
0.125% per annum on the face amount of each Letter of Credit, payable in advance at the time of issuance, provided that in no event shall such
fee be less than $750, and (iii) to the Issuing Lender, for its own account, its standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder. Participation fees accrued through and including the last day of March,
June, September and December of each year shall be payable on such last day, commencing on the first such date to occur after the date of this
Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be
payable on demand. Any other fees payable to the Issuing Lender pursuant to this Section 14.2 shall be payable within ten (10) days after
demand. All participation fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the maximum ate
allowable by law, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable
for the actual number of days elapsed (including the first day but excluding the last day).
14.3. Agency Fee . The Borrower shall pay to the Administrative Agent, for its own account, such fees as shall have been agreed in
accordance with the letter agreement dated as of even date herewith between the Borrower and the Administrative Agent.
14.4. Underwriting Fee . The Borrower shall pay to the Administrative Agent for distribution to each of the Lenders, for its own account,
such fees as shall have been agreed in accordance with the letter agreement dated as of even date herewith between the Borrower and the
Administrative Agent.
14.5. Costs, Charges and Expenses . The Borrower agrees to pay the Agents and the Lenders upon demand (whether or not the Credit
Facility or any part thereof is made available hereunder) all reasonable costs, charges and expenses (including legal fees and expenses, as well as
travel expenses of the Agents and the Lenders) incurred by the Administrative Agent in connection with the negotiation, preparation,
syndication, execution and enforcement or attempted enforcement of this Agreement, the Notes or otherwise in connection with the Credit
Facility, as well as in connection with any supplements, amendments, assignments, waivers or consents relating thereto.
SECTION 15. APPLICABLE LAW, JURISDICTION AND WAIVER
15.1. Applicable Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
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15.2. Jurisdiction . The Borrower hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United
States District Court for the Southern District of New York in any action or proceeding brought against it by the Agents and the Lenders under
this Agreement or under any document delivered hereunder and the Borrower hereby irrevocably appoints Farkouh, Furman & Faccio, LLP, 460
Park Avenue, 12 th Floor, New York, NY 10022 (Attention: Fred Farkouh), its attorney-in-fact and agent for service of summons or other legal
process thereon, which service may be made by serving a copy of any summons or other legal process in any such action or proceeding on such
agent and such agent is hereby authorized and directed to accept by and on behalf of the Borrower service of summons and other legal process of
any such action or proceeding against the Borrower. The service, as herein provided, of such summons or other legal process in any such action
or proceeding shall be deemed personal service and accepted by the Borrower as such, and shall be legal and binding upon the Borrower for all
the purposes of any such action or proceeding. Final judgment (a certified or exemplified copy of which shall be conclusive evidence of the fact
and of the amount of any indebtedness of a Borrower to any Agent or Lender) against the Borrower in any such legal action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment. The Borrower will advise the Administrative Agent promptly
of any change of address of the foregoing agent or of the substitution of another agent therefor. In the event that the foregoing agent or any other
agent appointed by the Borrower shall not be conveniently available for such service or if the Borrower fails to maintain an agent as provided
herein, the Borrower hereby irrevocably appoints the person who then is the Secretary of State of the State of New York as such attorney-in-fact
and agent. The Borrower will advise the foregoing agent of the appointment made hereby, but failure to so advise shall not affect the
appointment made hereby. Notwithstanding anything herein to the contrary, the Agents and the Lenders may bring any legal action or
proceeding in any other appropriate jurisdiction.
15.3. Waiver of Jury Trial . IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, AND THE AGENTS AND THE
LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE NOTES.
SECTION 16. THE AGENTS
16.1. Appointment of Agents . Each of the Lenders hereby irrevocably appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and under the Notes as are delegated to such Agent by the terms hereof and thereof.
Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable for any action taken or omitted to be taken
by it or them under this Agreement and under the Notes or in connection therewith, except for its or their own gross negligence or willful
misconduct. It is understood and agreed that the use of the term “agent” herein or in any other Security Documents (or any other similar term)
with reference to the any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine
of any applicable law nor does the term “agent” connote any advisory duty. Instead such term is used as a matter of market custom, and is
intended to create or reflect only an administrative relationship between contracting parties.
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16.2. Distribution of Payments . Whenever any payment or prepayment is received by the Administrative Agent from the Borrower for the
account of the Lenders, or any of them, whether of principal or interest on the Notes, commissions, fees under Section 14, or otherwise
(including pursuant to Section 9.4), it will thereafter cause like funds relating to such payment to be promptly distributed ratably to the Lenders
according to their respective Commitments, in each case to be applied according to the terms of this Agreement. Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrower
will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the
Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such
Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such
payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal Funds Rate.
16.3. Adjustments . If any Lender (a “Benefitted Lender”) shall at any time receive any payment of all or any part of the Advances made
by such Lender, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 9.1(k) or (m), or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender in respect of such other Lender’s Advances, or interest thereon, such Benefitted Lender shall purchase
for cash from each of the other Lenders such portion of each such other Lender’s Advances, and shall provide each of such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders, provided , however , that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender’s Advances
may exercise all rights of payment (including, without limitation, rights of set-off, to the extent not prohibited by law) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
16.4. Holder of Interest in Notes . The Administrative Agent may treat each Lender as the holder of all of the interest of such Lender in its
Notes unless and until the Administrative Agent has received a copy of an Assignment and Assumption Agreement evidencing the transfer of all
or any part of such Lender’s interest in the Credit Facility.
16.5. No Duty to Examine, Etc . The Agents shall not be under a duty to examine or pass upon the validity, effectiveness or genuineness of
this Agreement, the Notes or any instrument, document or communication furnished pursuant to this Agreement or the Notes or in connection
with any thereof and the Agents shall be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper
parties and are what they purport to be.
16.6. Agents as Lenders . With respect to that portion of the Credit Facility made available by it, each Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were not an Agent, and the term “Lender” or “Lenders” shall
include the Agents in their capacity as Lenders. Each Agent and its Affiliates may accept deposits from, lend money to and generally engage in
any kind of business with, the Borrower as if it were not an Agent.
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16.7. Obligations of Agents . (a) The obligations of each Agent under this Agreement and under the Notes are only those expressly set
forth herein and therein.
(b) No Duty to Investigate . No Agent shall at any time be under any duty to investigate whether an Event of Default, or an event
which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred or to investigate the
performance of this Agreement and the Notes by the Borrower.
(c) Reports and Notices . Promptly upon receipt thereof by the Administrative Agent, the Administrative Agent shall furnish each
Lender with a copy of all financial reports and notices delivered to it by the Borrower hereunder.
16.8. Discretion of Agents . (a) Each Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take
under or in respect of, this Agreement and the Notes, unless such Agent shall have been instructed by the Majority Lenders to exercise such
rights or to take or refrain from taking such action; provided , however , that such Agent shall not be required to take any action which exposes
such Agent to personal liability or which is contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders . Each Agent shall in all cases be fully protected in acting or refraining from acting under this
Agreement and under the Notes in accordance with the instructions of the Majority Lenders (or, where expressly required hereby, all the
Lenders), and any action taken or failure to act pursuant to such instructions shall be binding on all of the Lenders.
16.9. Assumption re Event of Default . The Administrative Agent shall be entitled to assume that no Event of Default, or event which with
the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing, unless the Administrative
Agent has been notified by the Borrower of such fact or has been notified by a Lender that such Lender considers that an Event of Default or
such an event (specifying in detail the nature thereof) has occurred and is continuing. In the event that the Administrative Agent shall have been
notified by any party in the manner set forth in the preceding sentence of any Event of Default or of an event which with the giving of notice or
lapse of time, or both, would constitute an Event of Default, the Administrative Agent shall promptly notify the Lenders and shall take action
and assert such rights under this Agreement or the Notes as the Majority Lenders shall request in writing.
16.10. No Liability of Agents and the Lenders . No Agent or Lender shall be under any liability or responsibility whatsoever:
(a) to the Borrower or any other person or entity as a consequence of any failure or delay in performance by, or any breach by, any
other Lender or any other person of any of its or their obligations under this Agreement or under the Notes;
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(b) to any Lender or Lenders as a consequence of any failure or delay in performance by, or any breach by the Borrower of any of its
obligations under this Agreement or under the Notes; or
(c) to any Lender or Lenders for any statements, representations or warranties contained in this Agreement or in the Notes or in any
document or instrument delivered in connection with the transaction hereby contemplated; or for the validity, effectiveness, enforceability
or sufficiency of this Agreement and the Notes or any document or instrument delivered in connection with the transactions hereby
contemplated.
16.11. Indemnification of Agents . The Lenders agree to indemnify each Agent (to the extent not reimbursed by the Borrower and without
limiting its obligation to do so ), pro rata according to the respective amounts of their Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including
reasonable legal fees and expenses incurred in investigating claims and defending itself against such liabilities) which may be imposed on,
incurred by or asserted against, such Agent in any way relating to or arising out of this Agreement and the Notes, any action taken or omitted by
such Agent hereunder or thereunder or the preparation, administration, amendment or enforcement of, or waiver of any provision of, this
Agreement and the Notes, except that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct.
16.12. Consultation with Counsel . The Administrative Agent may consult with legal counsel selected by the Administrative Agent and
shall not be liable for any action taken, permitted or omitted by it in good faith in accordance with the advice or opinion of such counsel.
16.13. Resignation . Each Agent may resign at any time by giving sixty (60) Banking Days’ written notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Lenders and shall have accepted such appointment within sixty (60) Banking Days after the retiring Agent’s giving notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank or trust company of
recognized standing. The appointment of any successor Agent shall (unless an Event of Default has occurred and is continuing) be subject to the
prior written consent of the Borrower, such consent not to be unreasonably withheld. After any retiring Agent’s resignation as Agent hereunder,
the provisions of this Section 16 shall continue in effect for its benefit with respect to any actions taken or omitted by it while acting as Agent. In
each case the resignation of an Agent shall not take effect unless a successor Agent has been duly appointed.
16.14. Representations of Lenders . Each Lender represents and warrants to each other Lender and each Agent that:
(a) in making its decision to enter into this Agreement and to make its Commitment available hereunder, it has independently taken
whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower, that it has made an independent credit
judgment and that it has not relied upon any statement, representation or warranty by any other Lender or any Agent; and
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(b) so long as any portion of its Commitment remains outstanding, it will continue to make its own independent evaluation of the
financial condition and affairs of the Borrower.
16.15. Notification of Event of Default . The Administrative Agent hereby undertakes promptly to notify the Lenders, and each of the
Lenders hereby undertakes promptly to notify the Administrative Agent and the other Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which the Administrative Agent or such Lender has actual knowledge.
SECTION 17. NOTICES AND DEMANDS
17.1. Notices in Writing . Every notice or demand under this Agreement shall be in writing and may be given or made by facsimile or
electronic transmission.
17.2. Addresses for Notice . All notices and other communications provided for hereunder shall be in writing (including facsimile and
electronic mail), if to the Borrower or the Administrative Agent, at the address set forth below and, if to the Lenders at their address and
facsimile numbers set forth in Schedule A or at such other address or facsimile numbers as such party may hereafter specify for the purpose by
notice to each other party hereto.
Any notices addressed to the Borrower shall be sent as follows:
Address:
c/o Seacor Holdings Inc.
460 Park Avenue, 12 th Floor
New York, NY 10022
Facsimile: 212 582 8522
Attention: Dick Fagerstal
Email: [email protected]
Any notices addressed to the Administrative Agent shall be sent as follows:
Address:
WFBLS Charlotte Agency Services
1525 W WT Harris Blvd
MAC D1109-019
Charlotte, NC 28262
Facsimile: 704 590 2782
with a copy to:
1000 Louisiana Street, 9 th Floor
MAC T0002-090
Houston, TX 77002
Facsimile: 713 739 1087
Attention: Corbin Womac, Vice President & Relationship Manager
Any notice sent by FACSIMILE shall be confirmed by letter dispatched as soon as practicable thereafter.
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The Security Parties agree that the Administrative Agent may make any communication available to the Creditors by posting the
communications on Intralinks, Fixed Income Direct or a substantially similar electronic transmission systems (the “ Platform ”). The
Security Parties acknowledge that the distribution of material through an electronic medium is not necessarily secure and that there are
confidentiality and other risks associated with such distribution.
THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINED BELOW) DO
NOT WARRANT THE ACCURACY OR COMPLETENESS OF ANY COMMUNICATIONS, OR THE ADEQUACY OF THE
PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN ANY COMMUNICATIONS. NO
WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH
ANY COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE CREDITORS, OR ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY OF THE RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ADVISORS OR REPRESENTATIVES OF THE CREDITORS, OR THEIR RESPECTIVE AFFILIATES (COLLECTIVELY, “
AGENT PARTIES ”) HAVE ANY LIABILITY TO ANY LENDER, ANY OTHER CREDITOR, ANY SECURITY PARTY OR
ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR
OTHERWISE) ARISING OUT OF THE TRANSMISSION BY ANY SECURITY PARTY, ANY OF THE AGENT PARTIES,
ANY OTHER CREDITOR, OR ANY OTHER PERSON OF ANY COMMUNICATIONS THROUGH THE INTERNET,
EXCEPT TO THE EXTENT THE LIABILITY OF AN AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT
PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Each Lender agrees that notice to it (as provided in the next sentence) specifying that any communications have been posted to the
Platform shall constitute effective delivery of such communications to such Lender for purposes of this Agreement, the Notes and the
Security Documents. Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time
to time (i) of such Lender’s email address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing
notice may be sent to such email address.
17.3. Notices Deemed Received . Every notice or demand shall, except so far as otherwise expressly provided by this Agreement, be
deemed to have been received (provided that it is received prior to 2 p.m. New York time; otherwise it shall be deemed to have been received on
the next following Banking Day), in the case of a facsimile or electronic mail at the time of dispatch thereof (provided further that if the date of
dispatch is not a Banking Day in the locality of the party to whom such notice or demand is sent it shall be deemed to have been received on the
next following Banking Day in such locality) and, in the case of a letter, at the time of receipt thereof.
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SECTION 18. MISCELLANEOUS
18.1. Time of Essence . Time is of the essence of this Agreement but no failure or delay on the part of the Agents and the Lenders to
exercise any power or right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by the Agents and the
Lenders of any power or right hereunder preclude any other or further exercise thereof or the exercise of any other power or right. The remedies
provided herein are cumulative and are not exclusive of any remedies provided by law.
18.2. Unenforceable, etc.; Provisions - Effect . In case any one or more of the provisions contained in this Agreement or in the Notes
would, if given effect, (i) cause such of the Borrower or any of the Subsidiaries, as the case may be, which owns United States registered
Helicopters to cease to be a citizen of the United States as defined by the FAA, or cause a transfer of any of the Helicopters registered under the
laws of the United States of America in violation of any FAA regulation or (ii) be otherwise invalid, illegal or unenforceable in any respect under
any law applicable in any relevant jurisdiction, including an Acceptable Jurisdiction, said provision shall not be enforceable against the Borrower
or any of the Subsidiaries, as the case may be, but the validity, legality and enforceability of the remaining provisions herein or therein contained
shall not in any way be affected or impaired thereby.
18.3. References . References herein to Sections and Schedules are to be construed as references to sections of, and schedules to, this
Agreement.
18.4. Further Assurances . The Borrower agrees that if this Agreement, the Notes or the Security Documents shall at any time be deemed
by the Administrative Agent for any reason insufficient in whole or in part to carry out the true intent and spirit hereof or thereof, it will execute
or cause to be executed such other and further assurances and documents as in the opinion of the Administrative Agent may be required in order
more effectively to accomplish the purposes of this Agreement, the Notes and the Security Documents.
18.5. Entire Agreement; Amendments . This Agreement, the Notes, the Security Documents and the letter agreements referred to in
Sections 14.3 and 14.4 constitute the entire agreement of the parties hereto, including all parties added hereto pursuant to an Assignment and
Assumption Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute one and the same instrument. Any provision of this Agreement, the Notes or the Security Documents
may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Majority Lenders (and,
if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no amendment or waiver
shall, unless signed by all the Lenders, (i) increase or decrease or extend the Commitment of any Lender or subject any Lender to any additional
obligation other than those set forth herein, (ii) reduce the principal of or rate of interest on the Credit Facility or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on the Credit Facility or any Letter of Credit reimbursement or any fees or
other amounts hereunder or amend the definition of “Termination Date”, (iv) release any Guaranty or Collateral other than as specifically
provided for herein or in
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any Security Document or agree to any subordination of a Lien under any of the Security Documents, (v) amend Sections 9.4, 11, 16.2 or 16.3,
(vi) waive any condition precedent to the availability of the Credit Facility or any Advance thereunder, (vii) amend or modify this Section 18.5,
(viii) change the definition of “Majority Lenders” or (ix) change any provisions relating to the pro rata nature of payments to, or disbursements
by, the Lenders.
18.6. USA Patriot Act Notice; OFAC and Bank Secrecy Act . The Administrative Agent hereby notifies the Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Patriot Act”), and the Administrative
Agent’s policies and practices, the Administrative Agent and each of the Lenders is required to obtain, verify and record certain information and
documentation that identifies the Borrower, which information includes the name and address of the Borrower and such other information that
will allow the Administrative Agent and the Lenders to identify the Borrower in accordance with the Patriot Act. In addition, the Borrower shall
(a) ensure that no Person who owns a controlling interest in or otherwise controls the Borrower or any subsidiary of any thereof is or shall be
listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Facility to
violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and
cause any of its subsidiaries to comply, with all applicable Bank Secrecy Act laws and regulations, as amended.
18.7. Right of Set-Off . Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or
the granting of the consent specified by Section 9.1 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 9.1 or otherwise with the consent of the Majority Lenders, each Agent and each Lender and each of their respective
Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set-off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such
Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter
existing under the Agreement, the Notes and the Security Documents, irrespective of whether such Agent or such Lender shall have made any
demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Agent and each Lender agrees
promptly to notify the Borrower after any such set-off and application; provided , however , that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of each Agent and each Lender and their respective Affiliates under this Section are in
addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender and their respective
Affiliates may have.
18.8. No Waiver, Remedies . No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any other Finance Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
95
18.9. Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower and the Creditors, and
thereafter this Agreement shall be binding upon and inure to the benefit of the Borrower, the Creditors and their respective successors and
assigns. All terms and provisions of this Agreement relating to Letters of Credit shall be effective until such time as all Letters of Credit,
including Extended Letters of Credit, have been cancelled.
18.10. Confidentiality . Neither the Administrative Agent nor any Lender shall disclose any Confidential Information to any Person
without the consent of the Borrower, other than (a) to the Administrative Agent’s or such Lender’s Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective permitted assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process, (c) as requested or required by any governmental authority or examiner (including the
National Association of Insurance Commissioners or any similar organization or quasi-regulatory authority) regulating such Lender, (d) to any
rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality
of any Confidential Information relating to the Security Parties received by it from such Lender, (e) in connection with any litigation or
proceeding to which the Administrative Agent or such Lender or any of its Affiliates may be a party or (f) in connection with the exercise of any
right or remedy under this Agreement, the Notes or any of the Security Documents.
18.11. Indemnification . The Security Parties hereby agree to indemnify and hold harmless the Creditors and each of their respective
Affiliates, directors, officers, employees, partners, representatives, advisors and agents and each of their respective heirs, successors and assigns
(each, an “ Indemnified Party ”) from and against any and all actions, suits, losses, claims, damages, liabilities and expenses of any kind or
nature, joint or several, to which such Indemnified Party may become subject or that may be incurred or asserted or awarded against such
Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any
investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) any matters contemplated by this Agreement, the
Credit Facility or any related transaction (including, without limitation, the execution and delivery of this Agreement, the Notes and the Security
Documents and the closing of the Credit Facility) or (ii) the use or the contemplated use of the proceeds of the Credit Facility, and will reimburse
each Indemnified Party for all out-of-pocket expenses (including reasonable attorneys’ fees, expenses and charges) on demand as they are
incurred in connection with any of the foregoing; provided that no Indemnified Party will have any right to indemnification for any of the
foregoing to the extent resulting from such Indemnified Party’s own gross negligence or willful misconduct as determined by a final nonappealable judgment of a court of competent jurisdiction. In the case of an investigation, litigation or proceeding to which the indemnity in this
paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any of the Security
Parties, any of their holders of Equity Interests or creditors of an Indemnified Party, whether or not an Indemnified Party is otherwise a party
hereto and whether or not the transactions contemplated hereby are consummated. Subject to the provisions hereof, the Security Parties also
agree that no Indemnified Party will have any liability (whether direct or indirect, in contract or tort, or otherwise) to themselves or their
Affiliates or to their respective holders of Equity Interests or creditors arising out of, related to or in connection with any aspect of the
transactions contemplated hereby, except to the extent such liability is determined in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party’s own gross negligence or willful misconduct. The Creditors will only have liability to
the Security Parties (as opposed to any other person), and the Lenders shall be liable solely in respect of their own
96
Commitments to the Credit Facility on a several, and not joint, basis with any other Lender and such liability shall only arise to the extent
damages have been caused by a breach of such Creditor’s obligations hereunder. Neither the Security Parties nor any Indemnified Party will be
liable to the other, or to their Affiliates or any other person for any indirect, consequential or punitive damages that may be alleged as a result of
this Agreement, the Notes, the Security Documents or any element of the Credit Facility. No Indemnified Party will be liable to the Security
Parties, their Affiliates or any other person for any damages arising from the use by third parties of informational materials or other materials
obtained by electronic means unless such third party shall have obtained such informational materials as a result of the gross negligence or
willful misconduct of an Indemnified Party. Neither any Security Party nor any Indemnified Party shall, without the prior written consent of each
other party affected thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give
rise to the right of any Indemnified Party to claim indemnification hereunder unless such settlement (a) includes a full and unconditional release
of all liabilities arising out of such claim or action and (b) does not include any statement as to or an admission of fault, culpability or failure to
act by or on behalf of any party.
[SIGNATURE PAGES TO FOLLOW]
97
IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed by their duly authorized representative as
of the day and year first above written.
ERA GROUP INC.,
as Borrower
/s/ Dick Fagerstal
By:
Name: Dick Fagerstal
Title: Executive Vice President/Chief Financial Officer
as Administrative Agent and Lender
/s/ Barry Parks
By:
Name: Barry Parks
Title: Director
By:
Name:
Title:
JPMORGAN CHASE BANK, N.A.,
as Mandated Lead Arranger, Bookrunner, Syndication
Agent and Lender
/s/ Donald Hunt
By:
Name: Donald Hunt
Title: Officer
By:
Name:
Title:
DEUTSCHE BANK SECURITIES INC.,
as Mandated Lead Arranger, Bookrunner and Co-Documentation
Agent
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Lender
By:
/s/ Stephen Pelich
Name: Stephen Pelich
Title: Vice President
By:
/s/ Omayra Laucella
Name: Omayra Laucella
/s/ David Sisler
By:
Name: David Sisler
Title: Director
By:
/s/ Evelyn Thierry
Name: Evelyn Thierry
Title: Director
SUNTRUST ROBINSON HUMPHREY, INC.,
as Mandated Lead Arranger and Bookrunner
SUNTRUST BANK,
as Co-Documentation Agent and Lender
/s/ Keith E. Roberts
By:
Name: Keith E. Roberts
Title: Director
By:
/s/ Gregory C. Magnuson
Name: Gregory C. Magnuson
By:
Name:
Title:
By:
Name:
Title:
REGIONS BANK,
as Mandated Lead Arranger, Bookrunner, Co-Documentation Agent
and Lender
By:
/s/ Stephen Hanas
Name: Stephen Hanas
Title: Senior Vice President
By:
Name:
Title:
COMPASS BANK,
as Managing Agent and Lender
WHITNEY BANK,
By:
/s/ Jarell Askew
Name: Jarell Askew
By:
/s/ Josh Jones
Name: Josh Jones
Title: Area President
By:
Name:
Title:
By:
Name:
Title:
GOLDMAN SACHS BANK USA,
COMERICA BANK,
/s/ Mark Walton
By:
Name: Mark Walton
Title: Authorized Signatory
By:
/s/ Gary Culbertson
Name: Gary Culbertson
By:
Name:
Title:
By:
Name:
Title:
THE NORTHERN TRUST COMPANY,
By:
/s/ Pritha Majumder
Name: Pritha Majumder
Title: Officer
By:
/s/ Pritha Majumder
Name: Pritha Majumder
Title: Officer
SCHEDULE A
PARTICULARS OF LENDERS
Participation
Name and Address
WELLS FARGO BANK,
NATIONAL ASSOCIATION
Total
Commitment
Swing Line
Commitment
$50,000,000
$25,000,000
14.2857%
$50,000,000
N/A
14.2857%
$45,000,000
N/A
12.8571%
$45,000,000
N/A
12.8571%
Percentage
MAC D1109-019
Charlotte, NC 28262
With a copy to:
1000 Louisiana, 9th Floor
MAC T0002-090
Houston, Texas 77002
Attention: Corbin Womac
JPMORGAN CHASE BANK, N.A.
201 St. Charles Ave, 28 th Floor
New Orleans, LA. 70170
Attention: Donald K. Hunt, Officer
DEUTSCHE BANK TRUST
COMPANY AMERICAS
700 Louisiana, #1500
Houston, TX 77002
Attention: David Sisler, Director
SUNTRUST BANK
303 Peachtree Street., NE
Atlanta, GA 30308
Attention: Greg Magnuson, Portfolio Manager
REGIONS BANK
2800 Ponce De Leon Blvd, 9 th Floor
Coral Gables, FL 33134
Attention: Stephen Hanas, SVP / RM
COMPASS BANK
24 Greenway Plaza, Suite 1616
Houston, TX 77046
Attention: Adrayll Askew, VP,
Credit Products Group
WHITNEY BANK
7910 Main Street
Houma, LA 70360
Attention: Josh J. Jones, Area
President
GOLDMAN SACHS BANK USA
200 West Street
New York, NY 10282
COMERICA BANK
910 Louisiana, Suite 410
Houston, TX 77002
Attention: Gary Culbertson, Vice
President
THE NORTHERN TRUST
COMPANY
50 S. LaSalle Street, M-27
Chicago, IL 60636
Attention: Thomas Hasenauer, Vice President
$45,000,000
N/A
12.8571%
$25,000,000
N/A
7.1429%
$25,000,000
N/A
7.1429%
$25,000,000
N/A
7.1429%
$20,000,000
N/A
5.7143%
$20,000,000
N/A
5.7143%
SCHEDULE B
HELICOPTER OWNING SUBSIDIARIES AND MORTGAGED HELICOPTERS
(as of December 22, 2011)
OWNERSHIP
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
MAKE
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
MODEL
A109
A109
A109
A109
A109
A109
A109
A119
A119
A119
A119
A119
A119
A119
U.S.A.
REGISTRATION
N18EA
N512LD
N530KS
N820FT
N903RW
N910LB
N334JT
N203JP
N108AG
N126RD
N330JN
N514RE
N602FB
N709CG
SERIAL
LOCATION
FOREIGN
OR
DOMESTIC
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
NO.
FAIR
MARKET
VALUE $
INSURED
VALUE $
11210
11683
11694
11701
11601
11682
11738
14535
14053
14504
14510
14701
14528
14052
2,906,788
3,609,773
3,949,151
3,897,896
3,113,941
3,462,664
4,333,167
2,749,775
2,540,827
2,523,827
2,431,386
2,719,016
2,755,596
2,607,648
4,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
3,250,000
3,000,000
3,000,000
2,750,000
3,000,000
3,250,000
3,000,000
SCHEDULE B
HELICOPTER OWNING/OPERATING SUBSIDIARIES AND OTHER SUBSIDIARIES
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
A119
N715RT
A119
N802SM
A119 N822MM
A119
N915BE
A119
N927JK
A119
N628RL
A119
N920JD
AS350 N196EH
AS350 N215EH
AS350 N216EH
AS350 N108TA
AS350 N178EH
AS350 N181EH
AS350 N182EH
AS350 N183EH
AS350 N185EH
AS350 N186EH
AS350 N187EH
AS350 N212EH
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
14516
14711
14055
14519
14517
14713
14745
2976
3172
3184
3080
2264
2680
2681
2752
2823
2844
2839
3151
2,500,118
3,044,059
2,397,683
2,531,894
2,501,849
2,857,189
3,149,637
1,690,969
1,737,089
1,824,500
1,735,941
1,517,501
1,593,115
1,524,177
1,591,424
1,641,899
1,632,701
1,651,310
1,795,514
3,000,000
3,500,000
2,750,000
3,000,000
3,000,000
3,250,000
3,500,000
1,900,000
2,000,000
2,100,000
2,000,000
1,700,000
1,800,000
1,700,000
1,800,000
1,900,000
1,800,000
1,900,000
2,000,000
SCHEDULE B
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
AGUSTA
EUROCOPTER
EUROCOPTER
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AW139
AW139
AW139
AW139
AW139
AW139
AW139
AW139
BO105
BO105
N214EH
N217EH
N217FD
N328BF
N4061G
N420JA
N603WB
N747WB
N323AH
N149DH
N385RH
N415JH
N403CB
N109DR
N829SN
N561RV
N811TA
N290EH
N296EH
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
3163
3197
4221
4284
3051
4212
4225
2768
4649
41004
41013
41224
41206
31311
41244
41263
41269
S850
S849
1,783,213
1,710,029
2,232,222
2,266,591
1,646,227
2,256,652
2,214,581
1,583,699
2,477,421
10,213,014
12,224,775
12,498,356
12,441,281
13,177,593
14,573,455
13,788,015
13,835,273
562,592
539,050
2,000,000
1,900,000
2,500,000
2,500,000
1,900,000
2,500,000
2,500,000
1,800,000
2,800,000
11,250,000
13,500,000
13,750,000
13,750,000
14,500,000
16,250,000
15,250,000
15,250,000
750,000
750,000
SCHEDULE B
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
SIKORSKY
SIKORSKY
SIKORSKY
SIKORSKY
SIKORSKY
SIKORSKY
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EC135 N156MC
EC135 N320TV
EC135 N357TC
EC135 N430TM
EC135 N551BA
EC135
N605SS
EC135 N611LS
EC135
N517JF
EC135 N812DR
S-76A N575EH
S-76A N577EH
S-76A N578EH
S-76C N905RD
S-76C N547WM
S-76C N531BH
EC135
N133JG
EC135 N602SH
EC135
N127JL
EC135
N228BJ
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
GOM
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
613
467
626
457
188
461
472
777
752
760366
760222
760099
760610
760722
760725
0915
0937
0976
0982
4,718,706
4,478,646
4,408,700
4,226,529
4,005,543
4,169,938
4,316,862
4,970,535
4,768,251
2,528,092
2,177,724
2,115,175
7,921,040
9,495,733
9,589,959
4,608,000
4,608,000
4,608,000
4,583,726
5,250,000
5,000,000
5,000,000
5,000,000
4,500,000
5,000,000
5,000,000
5,500,000
5,250,000
3,000,000
2,500,000
2,500,000
10,000,000
10,500,000
10,750,000
5,250,000
5,250,000
5,250,000
5,250,000
SCHEDULE B
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
EUROCOPTER
AGUSTA
BELL
BELL
BELL
BELL
BELL
BELL
EC135
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AS350
AW139
BH212
BH212
BH212
BH212
BH212
BH212
N89EM
N166EH
N161EH
N188EH
N190EH
N191EH
N192EH
N193EH
N194EH
N195EH
N725SG
N159JK
N307JN
N357EH
N358EH
N359EH
N508EH
N509EH
N523EH
Pennsylvania
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Alaska
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
0049
2194
2144
2954
2974
2505
2582
2599
2608
2615
2856
3253
31071
31209
31211
31212
30908
30925
31214
3,733,543
1,527,038
1,298,242
1,657,391
1,674,925
1,539,661
1,505,954
1,581,664
1,497,912
1,613,892
1,479,562
1,824,643
10,140,219
2,321,722
2,428,339
2,555,964
2,189,243
2,193,020
2,590,969
4,250,000
1,700,000
1,500,000
1,900,000
1,900,000
1,700,000
1,700,000
1,800,000
1,700,000
1,800,000
1,700,000
2,100,000
11,250,000
2,750,000
2,750,000
3,000,000
2,500,000
2,500,000
3,000,000
SCHEDULE B
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era Helicopters LLC
Era MED LLC
Era MED LLC
Era MED LLC
Era MED LLC
Era Leasing LLC
Era Leasing LLC
Era Leasing LLC
BELL
BELL
EUROCOPTER
EUROCOPTER
SIKORSKY
AGUSTA
AGUSTA
EUROCOPTER
EUROCOPTER
EUROCOPTER
SIKORSKY
SIKORSKY
AGUSTA
SIKORSKY
BH212
BH412
BO105
BO105
S-76
AW139
AW139
BK117
BK117
BK117
S-76
S-76C
AW139
S-76A
N510EH
N168EH
N291EH
N294EH
N573EH
N482LA
N804CB
N116MB
N135CP
N532KH
N574EH
N928DZ
N813DG
N911LV
Alaska
Domestic
Alaska
Domestic
Alaska
Domestic
Alaska
Domestic
Ohio
Domestic
Pennsylvania Domestic
Ohio
Domestic
GOM
Domestic
Alaska
Domestic
Ohio
Domestic
Grand Total
31113
33058
S842
S846
760373
41272
41277
7095
7014
7069
760369
760609
31032
760281
2,163,068
1,771,028
490,226
661,920
2,394,893
13,057,980
13,760,382
2,103,107
1,950,341
2,154,198
2,547,111
7,309,144
10,520,431
2,352,440
405,433,393
2,500,000
2,500,000
750,000
750,000
3,500,000
14,500,000
15,250,000
2,500,000
2,250,000
2,500,000
3,500,000
10,000,000
11,750,000
2,700,000
467,450,000
SCHEDULE C
EXISTING LIENS
SECURED OBLIGATIONS
COLLATERAL
U.S. Bancorp Equipment Finance, Inc.
Promissory Note dated November 24, 2010, in
the amount of $11,694,656
One (1) AgustaS.p.A. model AW139 helicopter bearing manufacturer’s serial number 31309
and U.S. Registration Number N603PW and two Pratt & Whitney Canada model PT6C-67C
aircraft engines bearing manufacturer’s serial numbers PCE-KB0718 and PCE-KB0712,
including but not limited to (i) all avionics, accessories, improvements, components,
instruments, furnishings, substitutions, additions, replacements, parts, tools and equipment
now or hereafter affixed to or used in connection with such airframe, engines and/or
propellers, together with all products and proceeds thereof, including but not limited to all
leased and/or chartered income and all insurance recoveries and (ii) all warranty, and/or
service rights relating to such airframe, engines, and/or propellers, and any claims thereunder.
U.S. Bancorp Equipment Finance, Inc.
Promissory Note dated December 23, 2010, in
the amount of $27,000,000
One (1) Eurocopter model EC225 LP helicopter bearing manufacturer’s serial number 2777
and U.S. Registration Number N109RR and two Turbomeca S.A. model Makila
2A1helicopter engines bearing manufacturer’s serial numbers 13070 and 13071, including but
not limited to (i) all avionics, accessories, improvements, components, instruments,
furnishings, substitutions, additions, replacements, parts, tools and equipment now or
hereafter affixed to or used in connection with such airframe, engines and/or propellers,
together with all products and proceeds thereof, including but not limited to all leased and/or
chartered income and all insurance recoveries and (ii) all warranty, and/or service rights
relating to such airframe, engines, and/or propellers, and any claims thereunder.
SCHEDULE D
EXISTING INDEBTEDNESS
SECURED DEBT
Principal loan balance- N109RR
Principal loan balance- N603PW
Total Secured Debt
UNSECURED DEBT
Eurocopter BK117 7059 N236KH;BK117 7124
N378LF;BK117 7178 N7062J;BK117 7223
N911CH;EC135 0051 N891T;EC135 0052 N892T - Canal
Air LLC Aircraft Leases
Hangar 1 & Parking - Anchorage 31506
LCH - Land Lease Hangar
Sikorsky S76 N911GH - Canal Air Aircraft Lease
Venice - Base Rental
LCH- Transport Center-Ops Facility Lease
Fourchon - Land Lease
Cameron - Base Rental
Hangar 4 & A/C Parking - Anchorage - 03722
LCH - Land Lease Parking
Galveston Facility - 8716 Bonanza
Galveston Facility - 8712 Bonanza
LCH - LC Admin 3 Facility Lease
Coatesville Land Lease
LCH - Training Facility Lease
Copy Machines (HR, Purchasing, QA)
Eurocopter AS350B2 SN 3110 * CFS Aircraft Lease
Sikorsky S76 760153 N886AH- Canal Air LLC Aircraft Lease
Copy Machines (Accounting)
Cameron - Base Rental - Additional land
LCH - Land Lease Training
Lake Jackson Apartments
LCH - Hess Bldg - Acctg
Mobile, AL Apartments
Houma Land Lease
Houma Apartments #511
LCH Apartments #314
LCH Apartments #813
Amount as of
December 22, 2011
$
$
$
25,380,000
10,258,504
35,638,504
Amount as of
December 22, 2011
8,862,708
1,509,922
804,644
450,275
417,049
357,808
336,063
138,600
127,211
120,341
97,600
64,725
40,000
38,253
36,000
30,684
28,744
28,724
28,565
24,500
24,100
24,000
22,870
17,802
12,600
10,500
10,420
10,000
10,000
9,800
9,720
LCH Apartments #1501
LCH Apartments #810
LCH Apartments #815
LCH Apartments #305
LCH Apartments #801
LCH Apartments #803
LCH Apartments #805
LCH Apartments #807
LCH Apartments #304
LCH Apartments #704
Brazoria Office/Hangar Rental
LCH Apartments #804
Land Lease - 27,000 parking - 031642 Alaska
Galveston Apartments
Valdez - Lot 1, 2 - Alaska
Houma Land Lease
04672/70794 - Deadhorse, Alaska
New Orleans Apartments
LCH Apartments #816
04672/70794 - Deadhorse, Alaska
LCH Trailer #72
LCH Trailer #105
LCH Trailer #88
Total Unsecured Debt
9,680
9,640
9,640
9,600
9,560
9,504
9,504
9,504
9,504
9,480
9,275
9,205
9,205
9,205
9,205
9,205
9,100
8,750
8,750
8,224
7,455
7,200
7,200
6,630
6,406
6,390
6,120
4,263
4,007
2,565
2,500
2,500
2,500
1,894
1,198
1,028
330
330
330
$13,960,814
SCHEDULE E
REQUIRED INSURANCE.
The Borrower shall ensure that each Mortgaged Helicopter is insured in accordance with the following insurance provisions:
(a) The policies of insurance for each Mortgaged Helicopter shall contain the following coverages:
(1) comprehensive aviation legal liability insurance in respect of each Mortgaged Helicopter against public liability risks
(including contractual liability, bodily injury and property damage coverage inclusive of liability to third parties), including war and
related perils (or comparable coverage provided by a government), in all cases with respect to or arising out of the servicing,
maintenance, use, operation, ownership or leasing of the Mortgaged Helicopter, and, when the Mortgaged Helicopter is not in
service, in accordance with a standard “ground” policy offered in the Lloyd’s London insurance market (or a comparable policy
offered in the U.S. or western European aviation insurance market or other aviation insurance market acceptable to the Majority
Lenders). All such insurance shall be in amounts that are not less than the amounts set forth opposite the Mortgaged Helicopter of the
same make and model on Annex I to this Schedule, and carried with insurers or re-insurers of recognized reputation and
responsibility in the aircraft insurance industry.
(2) comprehensive all-risk aircraft hull ground and flight insurance (i) with respect to any Mortgaged Helicopter, from time to
time, on an agreed value basis for an amount at least equal to 110% of the agreed Fair Market Value of such Mortgaged Helicopter at
the time it first becomes subject to the Lien of the Mortgage in favor of the Administrative Agent (the “Agreed Insured Value”) and
(ii) in an amount with respect to any Engine or Part when not installed on the Mortgaged Helicopter at least equal to the Fair Market
Value of such Engine or Part.
(3) hull war risks and allied perils insurance on the Mortgaged Helicopter (which shall include, but not be limited to, coverage
for hijacking, declared or undeclared war, insurrections, strikes, riots, commotions or labor disturbances, malicious acts or acts of
sabotage and unlawful seizure or wrongful exercise of control of the Mortgaged Helicopter in flight by a person on board such
Mortgaged Helicopter acting without the consent of the operator of such Mortgaged Helicopter), on an agreed value basis for an
amount at least equal to the Agreed Insured Value at such time and covering those perils which are covered by LSW555B; and
(4) liability war risks and allied perils insurance on the Mortgaged Helicopter (which shall include, but not be limited to,
coverage for hijacking, declared or undeclared war, insurrections, strikes, riots, commotions or labor disturbances, malicious acts or
acts of sabotage and unlawful seizure or wrongful exercise of control of the Mortgaged Helicopter in flight by a person on board such
Mortgaged Helicopter acting without the consent of the Lessee) of a scope of coverage at least as comprehensive as AVN 52D or
comparable government coverage.
(b) Such insurances shall be subject to an endorsement at least as comprehensive as AVN 67B (with the Administrative Agent being
named as loss payee in respect of any hull policy and the Lenders, other Creditors and the Administrative Agent being named as additional
insureds in respect of any liability policy).
(c) The Borrower shall cause each of the insurance policies to contain the following additional requirements:
(1) to the extent that the primary insurances have not been placed directly in Lloyds of London, or other internationally
recognized aviation insurance markets, 100% of such coverage shall be reinsured in such markets;
(2) each reinsurance policy, if any, shall have, if available on commercially reasonable terms, a market standard “cut-through”
endorsement;
(3) shall be payable in Dollars (or, if payable in another currency other than Dollars, shall be reinsured in Dollars in accordance
with (1) above), to the account specified by the Agent or to the account of the relevant party entitled thereto; and
(4) shall contain a 50/50 clause in accordance with current market practice as set forth in AVS103.
(d) The Borrower shall provide the following with respect to each insurance policy:
(1) a letter of undertaking from its insurance broker or provisions in the insurance policy, in either case, requiring the insurers
or underwriters to promptly notify the loss payees, contract parties or additional insured, as applicable, of any cancellation or material
change to any such policy or any failure of the Borrower, the applicable Helicopter Owning Subsidiary, or, if applicable, Eligible
Lessee to make any premium payment or installment; and
2
(2) the Borrower, each Helicopter Owning Subsidiary and, if applicable, each Eligible Lessee (by means of Eligible Leases or
otherwise) is required to deliver or cause to be delivered to the Administrative Agent from the applicable insurance broker, on or
prior to the Drawdown Date for each Mortgaged Helicopter and thereafter at least annually on or prior to each renewal date of such
insurance: certificate(s) of insurance, in English, certifying the date and time of commencement and expiry of each insurance policy;
specifying the deductible amounts and levels of co-insurance or re-insurance, if any, for each type of loss; providing a full list of
underwriting security, each insurer being named with its percentage for each insurance, or, if not available, stating in which market
the insurance is placed; and a letter from such broker, if available, confirming that the insurances comply with this Required
Insurance, and if the Borrower receives copies of such documents, the Borrower shall deliver copies of such documents to the
Administrative Agent to the extent that the Administrative Agent has not received such documents.
Contingent Insurance . With respect to each Mortgaged Helicopter, the Borrower or the relevant Helicopter Owning Subsidiary shall
procure:
(a) contingent liability insurance (including coverage that will respond in addition to or excess of the Eligible Lessees’ primary
liability insurance, if applicable, it being understood that such coverage does not protect such Lessee) on a per occurrence basis in an
amount not less than the amount referenced in Annex I as the Minimum Comprehensive Liability for such Mortgaged Helicopter; and
(b) contingent hull insurance on a per occurrence basis in an amount not less than the Agreed Insured Value for such Mortgaged
Helicopter.
All such contingent policies of insurance shall be subject to London Form LSW610A, with endorsements consistent with the
endorsements set forth above (to the extent not inconsistent with such London Form).
3
Annex I to Schedule E
Agreed
Mortgaged
Helicopter
Manufacturer
Model
Serial No.
4
Minimum
Comprehensive
Insured
Liability
Value
SCHEDULE F
Tier 1 Jurisdictions
United Kingdom
Norway
Sweden
Canada
Tier 2 Jurisdictions
Other jurisdictions in which the Cape Town Treaty has been Fully Implemented, except for Brazil and Nigeria
EXHIBIT 1
FORM OF
PROMISSORY NOTE
PROMISSORY NOTE
Dated as of
, 20
issued by
ERA GROUP INC.
as Borrower
in favor of
[LENDER]
as Lender
PROMISSORY NOTE
U.S.$[
]
____________, 20___
New York, New York
FOR VALUE RECEIVED, the undersigned ERA GROUP INC., a corporation incorporated under the laws of the State of Delaware
(hereinafter called the “Borrower”), hereby promises to pay to the order of [LENDER], a [JURISDICTION OF ORGANIZATION AND TYPE
OF ENTITY], as lender (the “Lender”), with offices at [ADDRESS], the principal sum of [COMMITMENT] ($[
]) or, if less, the
aggregate unpaid principal amount of the Advances from time to time outstanding made by the Lender to the Borrower pursuant to the senior
, 20__, by and among, (1) the Borrower, (2) WELLS
secured revolving credit facility agreement (the “Credit Agreement”) dated
FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON
HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers, (3) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE
BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as bookrunners,
(4) WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as administrative agent, (5) JPMORGAN CHASE BANK, N.A.,
as syndication agent, (6) DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK and REGIONS BANK, as co-documentation agents,
COMPANY, as managing agents, (8) Wells Fargo, as swing line bank and (9) the banks and financial institutions whose names and addresses
are set out in Schedule A thereto (together with any assignee thereof pursuant to Section 11 thereto and the Swing Line Bank, the “Lenders”).
The Borrower shall repay all outstanding Advances on the Termination Date. This promissory note may be prepaid on such terms as provided in
the Credit Agreement.
Words and expressions used herein and defined in the Credit Agreement shall have the same meanings herein as therein defined.
The Advances shall bear interest for the period(s) of one (1), three (3), six (6), nine (9) or twelve (12) months (or such other period as
may be agreed by the Lenders), as selected by the Borrower pursuant to Section 6.2 of the Credit Agreement, at the rate per annum which is
equal to the aggregate of, (a) LIBOR plus (b) the Applicable Margin, as provided in Section 6.1 of the Credit Agreement. Any payments under
the Credit Agreement or hereunder not paid when due, whether by acceleration or otherwise, shall bear interest thereafter at a rate per annum
equal to two hundred (200) basis points over the Applicable Rate then in effect with respect thereto at the time of such default.
All payments of principal and interest hereunder are payable in lawful money of the United States of America to the Administrative
Agent at its offices located at WFBLS Charlotte Agency Services, 1525 W WT Harris Blvd, MAC D1109-019 Charlotte, NC 28262 or to such
other branch of the Administrative Agent as the Administrative Agent may direct, in immediately available same day funds.
The Administrative Agent may endorse the amount, currency and the date of the making of each Advance and any payment or
prepayment thereof on the grid annexed hereto and made a part hereof, which endorsement shall constitute prima facie evidence of the accuracy
of the information so endorsed; provided , however , that any failure to endorse such information on such grid shall not in any manner affect the
obligation of the Borrower to make payment of principal and interest in accordance with the terms of this promissory note.
If this promissory note or any payment required hereunder becomes due and payable on a day which is not a Banking Day the due
date thereof shall be extended until the next following Banking Day unless such next following Banking Day falls in the following calendar
month, in which case, this promissory note or any payment required hereunder shall be due on the immediately preceding Banking Day. Any
interest shall be payable during any such extension at the rate applicable immediately prior thereto.
This promissory note is one of the Notes referred to in, and is entitled to the security and benefits of, the Credit Agreement. Upon the
occurrence of any Event of Default under the Credit Agreement, the principal hereof and accrued interest hereon may be declared to be and shall
thereupon become, forthwith, due and payable.
Presentment, demand, protest and notice of dishonor of this promissory note or any other notice of any kind are hereby expressly
waived.
THE UNDERSIGNED, AND BY ITS ACCEPTANCE HEREOF, THE LENDER, HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO OR ANY BENEFICIARY
HEREOF ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS PROMISSORY
NOTE.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
[Signature Page Follows]
IN WITNESS WHEREOF, the Borrower has executed and delivered this Promissory Note on the date and year first above written.
ERA GROUP INC.
By:
Name:
Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of
Each Advance
Amount of Principal
Outstanding
Notation
Paid or Repaid
Balance
Made By
EXHIBIT 2
FORM OF
DRAWDOWN NOTICE
DRAWDOWN NOTICE
, 20
Dated
from
ERA GROUP INC.
as Borrower
to
WELLS FARGO BANK, NATIONAL ASSOCIATION
as [Administrative Agent / Swing Line Bank]
Drawdown Notice
[Date]
Wells Fargo Bank, National Association
MAC D1109-019
Charlotte, NC 28262
, 20
(the
Pursuant to Section [3.5]/[3.6] of the Senior Secured Revolving Credit Facility Agreement dated as of
“Credit Agreement”) made by and among (1) ERA GROUP INC., a corporation incorporated under the laws of the State of Delaware
(hereinafter called the “Borrower”) (2) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK
SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers, (3) WELLS FARGO
SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY,
INC. and REGIONS BANK, as bookrunners, (4) WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent (the
“Administrative Agent”), (5) JPMORGAN CHASE BANK, N.A., as syndication agent, (6) DEUTSCHE BANK SECURITIES INC.,
SUNTRUST BANK and REGIONS BANK, as co-documentation agents, (7) COMPASS BANK, WHITNEY BANK, GOLDMAN SACHS
BANK USA, COMERICA BANK and THE NORTHERN TRUST COMPANY, as managing agents (8) Wells Fargo, as swing line bank (the
“Swing Line Bank”) and (9) the banks and financial institutions whose names and addresses are set out in Schedule A thereto (together with any
assignee thereof pursuant to Section 11 thereto and the Swing Line Bank, the “Lenders”, and each a “Lender”), the undersigned hereby gives the
[Administrative Agent]/[Swing Line Bank] notice of a drawdown of a [Revolving Credit]/[Swing Line] Advance. All terms used herein, shall
have the meanings given thereto in the Credit Agreement.
Drawdown Date:
Amount:
Purpose:
Initial Interest Period(s):
Specify whether LIBOR Advance or Base Rate Advance:
Disbursement Instructions:
The undersigned hereby represents and warrants that (a) the representations and warranties stated in Section 2 of the Credit
Agreement (updated mutatis mutandis ) are true and correct on the date hereof and will be true and correct on the Drawdown Date specified
above as if made on such date, and (b) no Event of Default has occurred and is continuing or will have occurred and be continuing on the
Drawdown Date, and no event has occurred or is continuing which, with the giving of notice or lapse of time, or both, would constitute an Event
of Default.
In the event that the [Lenders]/[Swing Line Bank] shall not be obliged under the terms of the Credit Agreement to make the above
requested Advance (including, without limitation any such failure resulting from the failure of the Borrower to satisfy a condition precedent set
forth in Section 4 of the Credit Agreement) 1 , the Borrower shall indemnify and hold fully harmless the [Lenders or any of them]/[Swing Line
Bank], against any losses which the [Lenders or any of them]/[Swing Line Bank], may sustain as a result of borrowing or agreeing to borrow
funds to meet the requested drawdown and the certificate of the [relevant Lender]/[Swing Line Bank] shall, absent manifest error, be conclusive
and binding on the Borrower as to the extent of any such losses.
This Drawdown Notice is effective upon receipt by you and shall be irrevocable.
ERA GROUP INC.
By:
Name:
Title:
1
Insert the following in the initial Drawdown Notice — “or the failure of the Credit Agreement to become effective”
EXHIBIT 3
FORM OF
LETTER OF CREDIT REQUEST
, 20
Dated
from
ERA GROUP INC.
as Borrower
to
[LETTER OF CREDIT ISSUER]
as Letter of Credit Issuer
No. _____ 1
Dated: [Date]
[Letter of Credit Issuer]
[Address]
Attn.: _________________
Ladies and Gentlemen:
, 20
The undersigned, ERA GROUP INC., refers to the Senior Secured Revolving Credit Facility Agreement, dated
(as amended, modified or supplemented from time to time, the “Credit Agreement”, the capitalized terms defined therein being used herein as
therein defined), made by and among (1) ERA GROUP INC., a corporation incorporated under the laws of the State of Delaware (hereinafter
called the “Borrower”) (2) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES
INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers, (3) WELLS FARGO SECURITIES,
LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and
REGIONS BANK, as bookrunners, (4) WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent, (5) JPMORGAN
CHASE BANK, N.A., as syndication agent, (6) DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK and REGIONS BANK , as codocumentation agents, (7) COMPASS BANK, WHITNEY BANK, GOLDMAN SACHS BANK USA, COMERICA BANK and THE
NORTHERN TRUST COMPANY, as managing agents, (8) Wells Fargo, as swing line bank (the “Swing Line Bank”) and (9) the banks and
financial institutions whose names and addresses are set out in Schedule A thereto (together with any assignee thereof pursuant to Section 11
thereto and the Swing Line Bank, the “Lenders”, and each a “Lender”).
Credit on
The undersigned hereby requests that the Letter of Credit Issuer issue on behalf and for the account of the undersigned a Letter of
, 20
(the “Date of Issuance”) in the aggregate amount of US$
.
The beneficiary of the requested Letter of Credit will be
, 20
.
have a stated termination date of
and such Letter of Credit will be in support of
2
and will
The undersigned hereby certifies that the following statements are true on the date hereof, and will be on the Date of Issuance:
1
2
Letter of Credit Request Number.
Insert description of the L/C Supportable Obligations to which this letter of Credit Request relates.
1.
the representations and warranties contained in Section 2 of the Credit Agreement are and will be true and correct in all material
respects, before and after giving effect to the issuance of the Letter of Credit requested hereby, as though made on the Date of
Issuance, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct
in all material respects as of such earlier date; and
2.
no Event of Default has occurred and is continuing, or would result after giving effect to the issuance of the Letter of Credit
requested hereby.
Copies of all documentation, if any, with respect to the supported transaction are attached hereto.
ERA GROUP INC.
By:
Name:
Title:
EXHIBIT 4
FORM OF
COMPLIANCE CERTIFICATE
, 20
DATED
FROM
ERA GROUP INC.
AS BORROWER
TO
AS ADMINISTRATIVE AGENT
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
ERA GROUP INC.
(this “Certificate”)
FOR THE PERIOD ENDED
The undersigned, being the chief financial officer of ERA GROUP INC., a corporation incorporated under the laws of the State of
Delaware (the “Borrower”), hereby certifies, on behalf of the Borrower, to Wells Fargo Bank, National Association, as administrative agent
(together with its successors and assigns, the “Administrative Agent”), in connection with that certain senior secured revolving credit facility
, 20
(as the same may be amended, modified, supplemented and/or restated from time to time the “Credit
agreement, dated as of
Agreement”), by and among, inter alia , the Borrower and Administrative Agent as follows:
(i)
that I have reviewed the financial statements of the Borrower dated as of [ — ] and for the [ — ] period then ended and such
statements fairly present the financial condition of the Borrower as of the dates indicated and the results of their operations and cash
flows for the periods indicated; and
(ii)
that I have reviewed the terms of the Credit Agreement, the Notes and the Security Documents (collectively, the “Transaction
Documents”) and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and the
condition of the Borrower during the accounting period covered by the financial statements referred to in clause (i) above; and
(iii) such review has not disclosed the existence during or at the end of such accounting period of any condition or event that constitutes
an Event of Default concerning the Borrower nor any event which with the giving of notice or lapse of time or both would constitute
an Event of Default concerning the Borrower, nor do I have knowledge of the existence of any such condition or event as at the date
of this Certificate [EXCEPT, [IF SUCH CONDITION OR EVENT EXISTED OR EXISTS, DESCRIBE THE NATURE AND
PERIOD OF EXISTENCE THEREOF AND WHAT ACTION THE BORROWER HAS TAKEN, IS TAKING AND PROPOSES
TO TAKE WITH RESPECT THERETO]]; [and]
(iv) the Borrower is in compliance with the covenants contained in Section 10.1 and 10.2 of the Credit Agreement, and in each other
Transaction Document to which it is a party, including, without limitation the covenants set forth in Section 10.1(a)(xvi) through
(xxi) of the Credit Agreement, and Annex A attached hereto shows the calculations thereof in reasonable detail; [and]
(v)
[attached hereto as Annex B is a List of Liens current as of the date hereof;] 1 [and]
(vi) [the Company has [redeemed]/[repurchased]
[preferred] capital stock] during the past quarter].
% of its outstanding [convertible subordinated bonds] [class of [common]/
Capitalized terms used herein without definition have the meaning ascribed thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of this
, 20
.
ERA GROUP INC.
By:
Name:
Title: Chief Financial Officer
1
To be included if requested by the Administrative Agent.
ANNEX A
1.
Section 10.1(a)(xvi) – Interest Coverage Ratio :
Maintain, on a consolidated basis, commencing with the completion of the fiscal quarter ending March 31, 2012, a ratio of not less than: 3.0 to
1.0 of (a) EBITDA minus dividends and distributions (other than dividends on, or a redemption of, the SEACOR Preferred Shares (if issued)
divided by (b) interest expense (including interest attributable to capitalized leases) in accordance with GAAP, during the four (4) fiscal quarters
preceding the date on which such ratio is determined, provided, however, that with respect to the first three fiscal quarters in calendar year 2012,
for purposes of determining interest expense, interest expense shall be calculated on an annualized pro forma basis as follows: (i) for the fiscal
quarter ending March 31, 2012, the actual interest expense for such period multiplied by four, (ii) for the two fiscal quarters ending June 30,
2012, the actual interest expense for such periods multiplied by two, and (iii) for the three full fiscal quarters ending September 30, 2012, the
actual interest expense for such periods multiplied by four-thirds.
A.
EBITDA minus dividends and distributions (other than dividends on, or a redemption of, the SEACOR Preferred Shares (if issued)
$[ — ]
TO
B.
Interest expense (including interest attributable to capitalized leases), on a consolidated basis, during the preceding four (4) fiscal
quarters
$[ — ]
Minimum requirement per Credit Agreement of not less than: 3.0 to 1.0
Actual = [ — ] :1.0
2.
Section 10.1(a)(xvii) – Funded Debt/EBITDA :
Maintain, on a consolidated basis, a ratio of Funded Debt to EBITDA of not more than 4.0 to 1.0, determined as at the end of each fiscal quarter,
provided , however , that upon successful placement of a Qualified Notes Offering, the Borrower shall maintain a ratio of Funded Debt to
EBITDA of not more than 5.0 to 1.0, determined as at the end of each fiscal quarter.
A.
Funded Debt
$[ — ]
TO
B.
EBITDA
$[ — ]
Maximum requirement per Credit Agreement of not more than: [4.0 to 1.0]/[5.0 to 1.0]
Actual = [ — ] :1.0
3.
[ Section 10.1(a)(xviii) – Secured Funded Debt/EBITDA :
Upon successful placement of a Qualified Notes Offering, maintain, on a consolidated basis, a ratio of Secured Funded Debt to EBITDA of not
more than (i) 3.0 to 1.0 through the fiscal quarter ending December 31, 2012 and (ii) 2.5 to 1.0 thereafter, determined as at the end of each fiscal
quarter.
A.
Secured Funded Debt
$[ — ]
B.
EBITDA
$[ — ]
Maximum requirement per Credit Agreement of not more than: [3.0 to 1.0]/[2.5 to 1.0].
Actual = [ — ] :1.0 ] 2
4.
Section 10.1(a)(xix) – Funded Debt/Fair Market Value of Owned Helicopters
Funded Debt shall not exceed sixty percent (60%) of the aggregate Fair Market Value of all Helicopters.
A.
Funded Debt
$[ — ]
B.
Fair Market Value of all Helicopters
$[ — ]
A expressed as a percentage of B
[ — ]%
Maximum requirement per Credit Agreement of not more than: 60%
Actual = [ — ]%
5.
Section 10.1(a)(xx) – Fair Market Value of Mortgaged Helicopters /Funded Debt
Procure that the ratio of (A) the sum of (i) the aggregate Fair Market Value of all Mortgaged Helicopters and (ii) the aggregate value of the
Borrower’s Accounts Receivable and Inventory (each as determined in accordance with GAAP) to (B) Funded Debt shall at all times equal or
exceed one hundred twenty percent (120%);
A.
The sum of
(i)
Fair Market Value of all Mortgaged Helicopters $[ — ]
+
(ii)
2
Borrower’s Accounts Receivables and Inventory $[ — ]
Only to be included upon a Qualified Notes Offering.
Total = $[ — ]
B.
Funded Debt
$[ — ]
[ — ]%
Minimum requirement per Credit Agreement of not less than: 120%
Actual = [ — ] %
6.
Section 10.1(a)(xxi) – Fair Market Value of United States Registered Helicopters
At least sixty percent (60%) of the aggregate Fair Market Value of all Mortgaged Helicopters comprises Mortgaged Helicopters that are
registered in the United States.
A.
Fair Market Value of all Mortgaged Helicopters registered in the United States
$[ — ]
B.
Fair Market Value of all Mortgaged Helicopters
$[ — ]
[ — ]%
Minimum requirement per Credit Agreement of not less than: 60%
Actual = [ — ] %
[ANNEX B]
List of Liens
EXHIBIT 5
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
, 20
Dated as of
from
[
]
as Assignor
to
[
]
as Assignee
ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), dated as of
, 20
between [NAME OF
ASSIGNOR], a [bank/corporation] organized under the laws of [JURISDICTION OF INCORPORATION OF ASSIGNOR] (the “Assignor”),
and [NAME OF ASSIGNEE], a [bank/corporation] organized under the laws of [JURISDICTION OF INCORPORATION OF ASSIGNEE] (the
“Assignee”), supplemental to:
, 20
(as amended, restated, modified or
(A) that certain Senior Secured Revolving Credit Facility Agreement, dated as of
supplemented from time to time, together the “Credit Agreement”), made by and among (1) (1) ERA GROUP INC., a corporation
incorporated under the laws of the State of Delaware (hereinafter called the “Borrower”) (2) WELLS FARGO SECURITIES, LLC,
JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and
REGIONS BANK, as mandated lead arrangers, (3) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A.,
DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as bookrunners,
(4) WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent (the “Administrative Agent”), (5) JPMORGAN
CHASE BANK, N.A., as syndication agent, (the “Syndication Agent”) (6) DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK
and REGIONS BANK, as co-documentation agents (the “Co-Documentation Agents, and together with the Administrative Agent and the
Syndication Agent, the “Agents”) (7) COMPASS BANK, WHITNEY BANK, GOLDMAN SACHS BANK USA, COMERICA BANK
and THE NORTHERN TRUST COMPANY, as managing agents (8) Wells Fargo, as swing line bank (the “Swing Line Bank”) and (9) the
banks and financial institutions whose names and addresses are set out in Schedule A thereto (together with any assignee thereof pursuant
to Section 11 thereto and the Swing Line Bank, the “Lenders”, and each a “Lender”), pursuant to which the Lenders agreed to make
available to the Borrower a revolving credit facility (the “Credit Facility”) in the maximum principal amount which may be outstanding at
any time (in Advances and/or Letters of Credit) of Three Hundred Fifty Million Dollars ($350,000,000) (with a request for such amount to
be increased up to Four Hundred Fifty Million Dollars ($450,000,000, as provided in the Credit Agreement); provided, however, that at no
time may the amount of outstanding Letters of Credit be in excess of Fifty Million Dollars ($50,000,000); and
(B) the promissory note made by the Borrower payable to the order of the Administrative Agent dated
“Note”) evidencing the Advances under the Credit Agreement.
Except as otherwise defined herein, terms defined in the Credit Agreement have the same meaning when used herein.
, 20
(the
In consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Assignor hereby sells, transfers and assigns to the Assignee [
]% of the Assignor’s right, title and interest in, to and
under the: (a) the Credit Agreement, (b) the Note (including, without limitation, its interest in the indebtedness evidenced by the Note) and
(c) the Letters of Credit. Simultaneously herewith, the Assignee shall pay to the Assignor an amount equal to the purchase price agreed between
them in a separate writing.
2. The Assignee hereby assumes [
]% of the obligations of the Assignor under the Credit Agreement and shall hereafter be a
“Lender” for all purposes of the Credit Agreement and the Note and a “Letter of Credit Participant” for purposes of the Letters of Credit, the
Assignee’s Commitment thereunder being $[
] in respect of the Credit Facility.
3. The [Assignor]/[Assignee] shall pay an administrative fee of Five Thousand Dollars ($5,000) to the Administrative Agent to
reimburse the Administrative Agent for its cost in processing the assignment and assumption herein contained.
4. If it is not a U.S. person, the Assignee shall, on or prior to the date hereof and from time to time thereafter when required by
applicable provisions of the United States Internal Revenue Code, provide the Borrower with two duly completed copies of Internal Revenue
Service Form W- 8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that the
Assignee is entitled to benefits under an income tax treaty to which the United States is a party that exempts withholding tax on payments under
the Credit Agreement and the Notes or certifying that the income receivable pursuant to the Credit Agreement or the Notes is effectively
connected with the conduct of a trade or business in the United States.
5. The Assignee irrevocably designates and appoints the Agents as its agent, and irrevocably authorizes the Agents, to take such
action on its behalf and to exercise such powers on its behalf under the Credit Agreement and under the Note, each as supplemented hereby, as
are delegated to the Agents by the terms of each thereof, together with such powers as are reasonably incidental thereto all as provided in
Section 16 of the Credit Agreement.
6. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the
solvency, financial condition or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the
Credit Agreement or the Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor or the Agents, and
based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement
and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower.
7. Every notice or demand under this Agreement shall be in writing and may be given by facsimile or electronic mail and shall be
sent (with a copy to the Administrative Agent) as follows:
If to the Assignor:
[NAME OF ASSIGNOR]
[ADDRESS]
Facsimile No.:
Email:
Attention:
If to the Assignee::
[NAME OF ASSIGNEE]
[ADDRESS]
Facsimile No.:
Email:
Attention:
If to the Administrative Agent:
[ADDRESS]
Facsimile No.:
Email:
Attention:
Any notice sent by facsimile or electronic mail shall be confirmed by letter dispatched as soon as possible thereafter. The Assignee
designates its address given above as its address for notices pursuant to Section 17.2 of the Credit Agreement.
8. EACH OF THE ASSIGNOR AND THE ASSIGNEE HEREBY WAIVES TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
9. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
10. This Agreement may be executed in several counterparts with the same effect as if the parties executing such counterparts
executed one agreement as of the date hereof and each counterpart when executed and delivered shall be deemed to be an original and all of such
counterparts together shall constitute this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above
written.
[NAME OF ASSIGNOR]
[NAME OF ASSIGNEE]
By:
By:
Name:
Title:
Name:
Title:
By:
By:
Name:
Title:
Consented and Agreed this
day of
, 20
Name:
Title:
:
ERA GROUP INC., as Borrower
By
Name:
Title:
By
Name:
Title:
By
Name:
Title:
EXHIBIT 6
FORM OF GUARANTY
GUARANTY
Dated as of
, 20
from
THE GUARANTORS NAMED HEREIN
and
THE ADDITIONAL GUARANTORS REFERRED TO HEREIN
as Guarantors
in favor of
TABLE OF CONTENTS
Page
Section 1.
Guaranty; Limitation of Liability
1
Section 2.
Guaranty Absolute
2
Section 3.
Waivers and Acknowledgments
4
Section 4.
Subrogation
4
Section 5.
Payments Free and Clear of Taxes, Etc.
5
Section 6.
8
Section 7.
Covenants
8
Section 8.
Amendments, Guaranty Supplements, Etc.
8
Section 9.
Notices, Etc.
9
Section 10.
No Waiver; Remedies
9
Section 11.
Right of Set-off
9
Section 12.
Indemnification
10
Section 13.
Subordination
11
Section 14.
Continuing Guaranty; Assignments Under the Credit Agreement
12
Section 15.
Execution in Counterparts
12
Section 16.
Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
12
Exhibit A - Guaranty Supplement
GUARANTY
GUARANTY dated as of
, 20
(this “ Guaranty ”) made by the Persons listed on the signature pages hereof and the
Additional Guarantors (as defined in Section 8(b)) (such Persons so listed and the Additional Guarantors being, collectively, the “ Guarantors ”
and, individually, each a “ Guarantor ”) in favor of Wells Fargo Bank, National Association, as Administrative Agent for the Lenders and the
Letter of Credit Issuers (together, the “Lender Parties”).
PRELIMINARY STATEMENT:
, 20
(as amended,
ERA Group Inc., a Delaware corporation (the “ Borrower ”), is party to the Credit Agreement dated as of
amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; the capitalized terms defined therein
and not otherwise defined herein being used herein as therein defined) with, inter alia, certain Lender Parties party thereto, and Wells Fargo
Bank, National Association, as Administrative Agent for such Lender Parties. Each Guarantor may receive, directly or indirectly, a portion of the
proceeds of the Advances under the Credit Agreement and will derive substantial direct and indirect benefits from the transactions contemplated
by the Credit Agreement. It is a condition precedent to the making of Advances and the issuance of Letters of Credit by the Lender Parties under
the Credit Agreement from time to time that each Guarantor shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to induce the Lender Parties to make Advances and to issue
Letters of Credit under the Credit Agreement from time to time, each Guarantor, jointly and severally with each other Guarantor, hereby agrees
as follows:
Section 1. Guaranty; Limitation of Liability . (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees
(i) the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or
otherwise, of all obligations of each other Security Party now or hereafter existing under or in respect of the Credit Agreement, Notes and
Security Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the
foregoing obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities,
contract causes of action, costs, expenses or otherwise, and (ii) the punctual and full performance and compliance by each other Security Party of
each and every duty, covenant, agreement and obligation thereof under the Credit Agreement, Notes and Security Documents (such obligations
being the “ Guaranteed Obligations ”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel)
incurred by the Administrative Agent or any other Creditor in enforcing any rights under this Guaranty or under the Credit Agreement, Notes or
Security Documents. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part
of the Guaranteed Obligations and would be owed by any other Creditor to any Creditor under or in respect of the Credit Agreement, Notes and
Security Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such other Security Party.
(b) Each Guarantor, and by its acceptance of this Guaranty, the Administrative Agent and each other Creditor, hereby confirms that it
is the intention of all such Persons that this Guaranty and the obligations of each Guarantor hereunder not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer
Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the obligations of each Guarantor hereunder. To
effectuate the foregoing intention, the Administrative Agent, the other Creditors and the Guarantors hereby irrevocably agree that the obligations
of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the obligations of such Guarantor
under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “ Bankruptcy Law ” means any proceeding of the
type referred to in Section 9.1(j) of the Credit Agreement or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of
debtors.
(c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any
Creditor under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to
each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Creditors under or in respect of the Credit
Agreement, Notes and Security Documents.
Section 2. Guaranty Absolute . Each Guarantor hereby, jointly and severally guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Credit Agreement, Notes and Security Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Creditor with respect thereto. The obligations of each
Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of any other Security
Party under or in respect of the Credit Agreement, Notes and Security Documents, and a separate action or actions may be brought and
prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or any other
Security Party or whether the Borrower or any other Security Party is joined in any such action or actions. The liability of each Guarantor under
this Guaranty shall be joint, several, irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any
defenses it may now have or hereafter acquire in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of any of Credit Agreement, Notes and Security Documents or any agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any
other obligations of any other Security Party under or in respect of the Credit Agreement, Notes and Security Documents, or any other
amendment or waiver of or any consent to departure from the Credit Agreement, Notes or Security Documents, including, without limitation,
any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Security Party or any of its Subsidiaries or
otherwise;
2
(c) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or
waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or
any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other
Obligations of any Security Party under the Credit Agreement, Notes or Security Documents or any other assets of any Security Party or any of
its Subsidiaries;
(e) any change, restructuring or termination of the corporate structure or existence of any Security Party or any of its Subsidiaries;
(f) the occurrence and/or continuance of any bankruptcy, insolvency, reorganization, liquidation, arrangement, adjustment of debt,
relief of debtors, dissolution, or similar proceeding with respect to the Borrower, any other Security Party, any Creditor, or any other Person,
including without limitation any modification of the Borrower’s obligations under Credit Agreement, Notes or Security Documents in
connection with any such proceeding;
(g) any failure of any Creditor to disclose to any Security Party any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of any other Security Party now or hereafter known to such Creditor (each
Guarantor waiving any duty on the part of the Creditors to disclose such information);
(h) any defect in the title, condition, compliance with specifications, design, operation, or fitness for use of, or any damage to or loss
of, or governmental prohibition or restriction with respect to, or, condemnation, requisition, or seizure of, any Collateral for any reason;
(i) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement (as hereinafter defined) or any other
guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed
Obligations; or
(j) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any
representation by any Creditor that might otherwise constitute a defense available to, or a discharge of, any Security Party or any other guarantor
or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by any Creditor or any other Person upon the insolvency, bankruptcy or reorganization of
the Borrower or any other Security Party or otherwise, all as though such payment had not been made.
3
Section 3. Waivers and Acknowledgments . (a) Each Guarantor hereby unconditionally and irrevocably waives promptness,
diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and
any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Creditor protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Security Party or any other Person
or any Collateral.
(b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based
upon an election of remedies by any Creditor that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation,
reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of
the other Security Parties, any other guarantor or any other Person or any Collateral and (ii) any defense based on any right of set-off or
counterclaim against or in respect of the obligations of such Guarantor hereunder.
(d) Each Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon such Guarantor and without
affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby
waives any defense to the recovery by the Administrative Agent and the other Creditors against such Guarantor of any deficiency after such
nonjudicial sale and any defense or benefits that may be afforded by applicable law.
(e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Creditor to disclose to such Guarantor
any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other
Security Party or any of its Subsidiaries now or hereafter known by such Creditor.
(f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement, Notes and Security Documents and that the waivers set forth in Section 2 and this Section 3 are
knowingly made in contemplation of such benefits.
Section 4. Subrogation . Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now
have or hereafter acquire against the Borrower, any other Security Party or any other insider guarantor that arise from the existence, payment,
performance or enforcement of such Guarantor’s obligations under or in respect of this Guaranty, the Credit Agreement, the Notes or the
Security Documents, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and
any right
4
to participate in any claim or remedy of any Creditor against the Borrower, any other Security Party or any other insider guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Borrower, any other Security Party or any other insider guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, all Letters of Credit shall have
expired or been terminated and have not been renewed, all amounts drawn under all Letters of Credit shall have been paid in full in cash and the
Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding
sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty, (b) the Termination Date and (c) the latest date of expiration or termination of all Letters of Credit and the payment in full in cash of
all amounts drawn under all Letters of Credit such amount shall be received and held in trust for the benefit of the Creditors, shall be segregated
from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so
received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Credit Agreement, Notes and Security
Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any
Guarantor shall make payment to any Creditor of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all
other amounts payable under this Guaranty shall have been paid in full in cash, (iii) the Termination Date shall have occurred and (iv) all Letters
of Credit shall have expired or been terminated and not been renewed and all amounts drawn under all Letters of Creditor shall have been paid in
full in cash, the Creditors will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the
Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.
Section 5. Payments Free and Clear of Taxes, Etc . (a) Any and all payments made by any Guarantor under or in respect of this
Guaranty, the Credit Agreement, the Notes or the Security Documents shall be made, in accordance with the Credit Agreement, free and clear of
and without deduction for any and all present or future Taxes. If any Guarantor shall be required by law to deduct any Taxes from or in respect
of any sum payable under or in respect of this Guaranty, the Credit Agreement, the Notes or the Security Documents to any Creditor, (i) the sum
payable by such Guarantor shall be increased as may be necessary so that after such Guarantor and the Administrative Agent have made all
required deductions (including deductions applicable to additional sums payable under this Section 5), such Creditor receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such Guarantor shall make all such deductions and (iii) such Guarantor
shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.
5
(b) In addition, each Guarantor agrees to pay any present or future Taxes that arise from any payment made by or on behalf of such
Guarantor under or in respect of this Guaranty, the Credit Agreement, the Notes or the Security Documents or from the execution, delivery or
registration of, performance under, or otherwise with respect to, this Guaranty, the Credit Agreement, the Notes and the Security Documents.
(c) Each Guarantor will indemnify each Creditor for and hold it harmless against the full amount of Taxes, and for the full amount of
taxes of any kind imposed by any jurisdiction on amounts payable under this Section 5, imposed on or paid by such Creditor and any liability
(including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within
30 days from the date such Creditor makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by or on behalf of any Guarantor, such Guarantor shall furnish to the
Administrative Agent, at its address referred to in Section 9, the original or a certified copy of a receipt evidencing such payment or, if no such
receipt is reasonably available, other evidence of payment thereof. In the case of any payment hereunder by or on behalf of any Guarantor
through an account or branch outside the United States or by or on behalf of such Guarantor by a payor that is not a United States person, if such
Guarantor determines that no Taxes are payable in respect thereof, such Guarantor shall furnish, or shall cause such payor to furnish, to the
Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from
Taxes. For purposes of subsections (d) and (e) of this Section 5, the terms “ United States ” and “ United States person ” shall have the meanings
specified in Section 7701 of the Internal Revenue Code.
(e) Upon the reasonable request in writing of any Guarantor, each Creditor organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date of its execution and delivery of the Credit Agreement in the case of each initial Lender or initial Letter
of Credit Issuer, as the case may be, and on or prior to the date of the Assignment and Assumption Agreement or other agreement pursuant to
which it becomes a Creditor in the case of each other Creditor, and from time to time thereafter upon the reasonable request in writing by any
Guarantor (but only so long thereafter as such Creditor remains lawfully able to do so), provide each of the Administrative Agent and such
Guarantor with two original Internal Revenue Service forms W-8ECI or W-8BEN, as appropriate, or any successor or other form prescribed by
the Internal Revenue Service, certifying that such Creditor is exempt from or entitled to a reduced rate of United States withholding tax on
payments under the Credit Agreement or the Notes. If the forms provided by a Creditor at the time such Creditor first becomes a party to the
Credit Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Creditor provides the appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided , however , that if, in the case
of a Creditor becoming a party to the Credit Agreement, at the date of the Assignment and Assumption Agreement pursuant to which a Creditor
becomes a party to the Credit Agreement, the Creditor assignor was entitled to payments under subsection (a) of this Section 5 in respect of
United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise includable in
6
Taxes) United States withholding tax, if any, applicable with respect to the Creditor assignee on such date. If any form or document referred to in
this subsection (e) and requested by any Guarantor pursuant to this subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8ECI or W-8BEN, that
the applicable Creditor reasonably considers to be confidential, such Creditor shall give notice thereof to the applicable Guarantor and shall not
be obligated to include in such form or document such confidential information. Upon the reasonable request in writing of any Guarantor, each
Creditor that is a United States person and is not an exempt recipient for U.S. backup withholding purposes shall deliver to such Guarantor two
copies of Internal Revenue Service form W-9 (or any successor form).
(f) For any period with respect to which a Creditor has failed to provide any Guarantor following such Guarantor’s request therefor
pursuant to subsection (e) above with the appropriate form described in subsection (e) above ( other than if such failure is due to a change in law
occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e)
above), such Creditor shall not be entitled to indemnification under subsection (a) or (c) of this Section 5 with respect to Taxes imposed by the
United States by reason of such failure; provided , however , that should a Creditor become subject to Taxes because of its failure to deliver a
form required hereunder, such Guarantor shall take such steps as such Creditor shall reasonably request to assist such Creditor to recover such
Taxes.
(g) Any Creditor claiming any additional amounts payable pursuant to this Section 5 agrees to use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would
avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment
of such Creditor, be otherwise disadvantageous to such Creditor.
(h) If for the purpose of obtaining or enforcing a judgment in any court in any country, it becomes necessary to convert into any other
currency (the “Judgment Currency”) an amount due in Dollars under this Guaranty then the conversion shall be made, in the discretion of the
Administrative Agent, at the rate of exchange prevailing either on the date of default or on the day before the day on which the judgment is given
or the order for enforcement is made, as the case may be (the “Conversion Date”) provided that the Administrative Agent shall not be entitled to
recover under this clause any amount in the Judgment Currency which exceeds at the Conversion Date the amount in Dollars due under this
Guaranty.
(i) If there is a change in the rate of exchange prevailing between the Conversion Date and the date of actual payment of the amount
due, the Guarantor shall pay such additional amounts (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount
paid in the judgment currency when converted at the rate of exchange prevailing on the date of payment will produce the amount then due under
this Guaranty in Dollars; any excess over the amount due received or collected by the Administrative Agent shall be remitted to the Guarantor.
7
(j) Any amount due from the Guarantor under this Section 5 shall be due as a separate debt and shall not be affected by judgment
being obtained for any other amounts due under or in respect of this Guaranty, the Credit Agreement, Notes or Security Documents; provided,
however, that nothing herein shall be construed so as to permit the Administrative Agent to recover amounts from the Guarantor previously paid
by any other party other than as provided herein.
(k) The term “rate of exchange” in this Section means the rate at which the Administrative Agent in accordance with its normal
practices is able on the relevant date to purchase Dollars with the judgment currency and includes any costs of exchange (including any
premium) payable in connection with such purchase.
Section 6. Representations and Warranties . Each Guarantor hereby makes each representation and warranty made in the Credit
Agreement, the Notes and the Security Documents by the Borrower with respect to such Guarantor and each Guarantor hereby further represents
and warrants as follows:
(a) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.
(b) Such Guarantor has, independently and without reliance upon any Creditor and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Security Document to which it is or
is to be a party, and such Guarantor has established adequate means of obtaining from each other Security Party on a continuing basis
information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise),
operations, performance, properties and prospects of such other Security Party.
(c) All representations, covenants and warranties made herein or in connection herewith shall survive the making of the Credit
Facility and the issuance of the Notes.
Section 7. Covenants . Each Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain
unpaid, any Letter of Credit shall be outstanding, any amounts drawn under any Letter of Credit shall remain unpaid or any Lender Party shall
have any Commitment in effect, such Guarantor will, unless the Majority Lenders shall otherwise consent in writing, perform and observe, and
cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Credit Agreement, Notes and
Security Documents on its or their part to be performed or observed or that the Borrower has agreed to cause such Guarantor or such
Subsidiaries to perform or observe.
Section 8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent
to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Administrative
Agent and the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for
which given; provided , however , that no amendment, waiver or consent shall, unless in writing and signed by all of the
8
Creditors affected by such amendment, waiver or consent, do any of the following: (a) reduce or limit the obligations of any Guarantor
hereunder, release any Guarantor hereunder or otherwise limit any Guarantor’s liability with respect to the obligations owing to the Creditors
under or in respect of the Credit Agreement, Notes and Security Documents, (b) postpone any date fixed for payment hereunder or (c) change the
number of Creditors or the percentage of (x) the Commitments, (y) the aggregate unpaid principal amount of the Advances or (z) the aggregate
Stated Amount of outstanding Letters of Credit that, in each case, shall be required for the Creditors or any of them to take any action hereunder.
(b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “
Guaranty Supplement ”), (i) such Person shall be referred to as an “ Additional Guarantor ” and shall become and be a Guarantor hereunder, and
each reference in this Guaranty to a “ Guarantor ” shall also mean and be a reference to such Additional Guarantor, and each reference in the
Credit Agreement, Notes and Security Documents to a “ Guarantor ” shall also mean and be a reference to such Additional Guarantor, and
(ii) each reference herein to “ this Guaranty ”, “ hereunder ”, “ hereof ” or words of like import referring to this Guaranty, and each reference in
the Credit Agreement, Notes and Security Documents to the “ Guaranty ”, “ thereunder ”, “ thereof ” or words of like import referring to this
Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement.
Section 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including facsimile or
electronic mail) and mailed, sent by facsimile, electronically mailed or delivered to it, if to any Guarantor, addressed to it in care of the Borrower
at the Borrower’s address specified in Section 17.2 of the Credit Agreement, if to any Agent or any Lender Party, at its address specified in
Section 17.2 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to each
other party. All such notices and other communications shall, when mailed, sent by facsimile or electronically mailed, be effective when
deposited in the mails, or transmitted by facsimile or electronic mail, respectively. Delivery by facsimile or electronic mail of an executed
counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any Guaranty Supplement to be executed
and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.
Section 10. No Waiver; Remedies . No failure on the part of any Creditor to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
Section 11. Right of Set-off . Each Creditor and each of their respective Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Creditor or such Affiliate to or for the credit or the account of any Guarantor
against any and all of the obligations of such Guarantor now or hereafter existing under the Credit Agreement, Notes and Security Documents,
9
irrespective of whether such Creditor shall have made any demand under this Guaranty, the Credit Agreement, Notes or Security Documents and
although such obligations may be unmatured. Each Creditor agrees promptly to notify such Guarantor after any such set-off and application;
provided , however , that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Creditor
and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off)
that such Creditors and their respective Affiliates may have.
Section 12. Indemnification . (a) Each of the Guarantors hereby agree to indemnify and hold harmless the Creditors and each of their
respective Affiliates, directors, officers, employees, partners, representatives, advisors and agents and each of their respective heirs, successors
and assigns (each, an “ Indemnified Party ”) from and against any and all actions, suits, losses, claims, damages, liabilities and expenses of any
kind or nature, joint or several, to which such Indemnified Party may become subject or that may be incurred or asserted or awarded against such
Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any
investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) any matters contemplated by this Guaranty, the
Credit Facility or any related transaction (including, without limitation, the execution and delivery of this Guaranty) or (ii) the use or the
contemplated use of the proceeds of the Credit Facility, and will reimburse each Indemnified Party for all out-of-pocket expenses (including
reasonable attorneys’ fees, expenses and charges) on demand as they are incurred in connection with any of the foregoing; provided that no
Indemnified Party will have any right to indemnification for any of the foregoing to the extent resulting from such Indemnified Party’s own
gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. In the case of an
investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any of the Guarantors, any of their holders of Equity Interests or creditors of an Indemnified
Party, whether or not an Indemnified Party is otherwise a party hereto and whether or not the transactions contemplated hereby are
consummated. Subject to the express provision hereof, each of the Guarantors also agrees that no Indemnified Party will have any liability
(whether direct or indirect, in contract or tort, or otherwise) to themselves or their Affiliates or to their respective holders of Equity Interests or
creditors arising out of, related to or in connection with any aspect of the transactions contemplated hereby, except to the extent such liability is
determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s own gross
negligence or willful misconduct. Neither any Guarantor nor any Indemnified Party will be liable to the other, or to their Affiliates or any other
person for any indirect, consequential or punitive damages that may be alleged as a result of this Guaranty or any element of the Credit Facility.
No Indemnified Party will be liable to the Guarantors, their Affiliates or any other person for any damages arising from the use by third parties
of informational materials or other materials obtained by electronic means unless such third party shall have obtained such informational
materials as a result of the gross negligence or willful misconduct of an Indemnified Party. Neither any Guarantor nor any Indemnified Party
shall, without the prior written consent of each other party affected thereby (which consent will not be unreasonably withheld), settle any
threatened or pending claim or action that would give rise to the right of any
10
Indemnified Party to claim indemnification hereunder unless such settlement (a) includes a full and unconditional release of all liabilities arising
out of such claim or action and (b) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of
any party.
(b) Without prejudice to the survival of any of the other agreements of any Guarantor under this Guaranty or the Credit Agreement,
Notes and Security Documents, the agreements and obligations of each Guarantor contained in Section 1(a) (with respect to enforcement
expenses), the last sentence of Section 2, Section 5 and this Section 12 shall survive the payment in full of the Guaranteed Obligations and all of
the other amounts payable under this Guaranty.
Section 13. Subordination . Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such
Guarantor by each other Security Party (the “ Subordinated Obligations ”) to the Guaranteed Obligations to the extent and in the manner
hereinafter set forth in this Section 13:
(a) Prohibited Payments, Etc . Except during the continuance of an Event of Default (including the commencement and continuation
of any proceeding under any Bankruptcy Law relating to any other Security Party), each Guarantor may receive payments from any other
Security Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including
the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Security Party), however, unless the
Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the
Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations . In any proceeding under any Bankruptcy Law relating to any other Security Party,
each Guarantor agrees that the Creditors shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest
and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in
such proceeding (“ Post Petition Interest ”)) before such Guarantor receives payment of any Subordinated Obligations.
(c) Turn-Over . After the occurrence and during the continuance of any Event of Default (including the commencement and
continuation of any proceeding under any Bankruptcy Law relating to any other Security Party), each Guarantor shall, if the Administrative
Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Creditors and deliver such
payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any
necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under
the other provisions of this Guaranty.
(d) Administrative Agent Authorization . After the occurrence and during the continuance of any Event of Default (including the
commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Security Party), the Administrative Agent is
authorized and empowered (but without any obligation to so do), in its discretion, (i) in
11
the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts
received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and
enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the
Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).
Section 14. Continuing Guaranty; Assignments Under the Credit Agreement . This Guaranty is a continuing guaranty and shall
(a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty, (ii) the Termination Date and (iii) the latest date of expiration or termination of all Letters of Credit and the payment in full
in cash of all amounts drawn under all Letters of Credit, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit
of and be enforceable by the Creditors and their successors, transferees and assigns. Without limiting the generality of clause (c) of the
immediately preceding sentence, any Creditor may assign or otherwise transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes held by it) to
any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Creditor herein or
otherwise, in each case as and to the extent provided in Section 11 of the Credit Agreement. No Guarantor shall have the right to assign its rights
hereunder or any interest herein without the prior written consent of the Creditors.
Section 15. Execution in Counterparts . This Guaranty and each amendment, waiver and consent with respect hereto may be executed
in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to
this Guaranty by facsimile or electronic mail shall be effective as delivery of an original executed counterpart of this Guaranty.
Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc . (a) This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) Each Guarantor hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United States
District Court for the Southern District of New York in any action or proceeding brought against it by the Agents and the Lender Parties under
this Guaranty or under any document delivered hereunder and each Guarantor hereby irrevocably appoints Farkouh, Furman & Faccio, LLP, 460
Park Avenue, 12 th Floor, New York, NY 10022 (Attention: Fred Farkouh), its attorney-in-fact and agent for service of summons or other legal
process thereon, which service may be made by serving a copy of any summons or other legal process in any such action or proceeding on such
agent and such agent is hereby authorized and directed to accept by and on behalf of each Guarantor service of summons and other legal process
of any such action or proceeding against any Guarantor. The service, as herein provided, of such summons or other legal process in any such
action or proceeding shall be deemed
12
personal service and accepted by each Guarantor as such, and shall be legal and binding upon each Guarantor for all the purposes of any such
action or proceeding. Final judgment (a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any
indebtedness of any Guarantor to any Agent or Lender Party) against such Guarantor in any such legal action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment. Each Guarantor will advise the Administrative Agent promptly of any change
of address of the foregoing agent or of the substitution of another agent therefor. In the event that the foregoing agent or any other agent
appointed by any Guarantor shall not be conveniently available for such service or if any Guarantor fails to maintain an agent as provided herein,
such Guarantor hereby irrevocably appoints the person who then is the Secretary of State of the State of New York as such attorney-in-fact and
agent. Each Guarantor will advise the foregoing agent of the appointment made hereby, but failure to so advise shall not affect the appointment
made hereby. Notwithstanding anything herein to the contrary, the Agents and the Lender Parties may bring any legal action or proceeding in
any other appropriate jurisdiction.
(c) IT IS MUTUALLY AGREED BY AND AMONG THE GUARANTORS, THE AGENTS AND THE LENDER PARTIES
THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS GUARANTY.
13
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
ERA HELICOPTERS, LLC
By:
Name:
Title:
ERA LEASING LLC
By:
Name:
Title:
ERA MED LLC
By:
Name:
Title:
ERA AEROLEO LLC
By:
Name:
Title:
AEROLEO INTERNACIONAL, LLC
By:
Name:
Title:
ERA CANADA LLC
By:
Name:
Title:
ERA DHS LLC
By:
Name:
Title:
ERA FBO LLC
By:
Name:
Title:
ERA FLIGHTSEEING LLC
By:
Name:
Title:
ERA HELICOPTERS (MEXICO) LLC
By:
Name:
Title:
ERA HELICOPTER SERVICES LLC
By:
Name:
Title:
15
Exhibit A
To the GUARANTY
FORM OF GUARANTY SUPPLEMENT
,
Wells Fargo Bank, National Association,
1000 Louisiana Street, 9 th Floor
Houston, TX 77002
Attention: [
]
Credit Agreement dated as of
, 20
among
ERA Group Inc., a Delaware corporation (the “ Borrower ”),
the Creditors party to the Credit Agreement and
Wells Fargo Bank, National Association, as Administrative Agent
Ladies and Gentlemen:
Reference is made to the above-captioned Credit Agreement and to the Guaranty referred to therein (such Guaranty, as in effect on
the date hereof and as it may hereafter be amended, supplemented or otherwise modified from time to time, together with this Guaranty
Supplement, being the “ Guaranty ”). The capitalized terms defined in the Guaranty or in the Credit Agreement and not otherwise defined herein
are used herein as therein defined.
Section 1. Guaranty; Limitation of Liability . (a) The undersigned hereby absolutely, unconditionally and irrevocably guarantees
(i) the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or
otherwise, of all obligations of each other Security Party now or hereafter existing under or in respect of the Credit Agreement, Notes and
Security Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the
foregoing obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premium, fees, indemnities, contract
causes of action, costs, expenses or otherwise, and (ii) the punctual and full performance and compliance by each other Security Party of each
and every duty, covenant, agreement and obligation thereof under the Credit Agreement, Notes and Security Documents (such obligations being
the “ Guaranteed Obligations ”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by
the Administrative Agent or any other Creditor in enforcing any rights under this Guaranty Supplement, the Guaranty, the Credit Agreement, the
Notes or the Security Documents. Without limiting the generality of the foregoing, the undersigned’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed
by any other Security Party to any Creditor under or in respect of the Credit Agreement, Notes and Security Documents but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Security
Party.
(b) The undersigned, and by its acceptance of this Guaranty Supplement, the Administrative Agent and each other Creditor, hereby
confirms that it is the intention of all such Persons that this Guaranty Supplement, the Guaranty and the obligations of the undersigned hereunder
and thereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty Supplement, the Guaranty
and the obligations of the undersigned hereunder and thereunder. To effectuate the foregoing intention, the Administrative Agent, the other
Creditors and the undersigned hereby irrevocably agree that the obligations of the undersigned under this Guaranty Supplement and the Guaranty
at any time shall be limited to the maximum amount as will result in the obligations of the undersigned under this Guaranty Supplement and the
Guaranty not constituting a fraudulent transfer or conveyance.
(c) The undersigned hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any
Creditor under this Guaranty Supplement, the Guaranty or any other guaranty, the undersigned will contribute, to the maximum extent permitted
by applicable law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Creditors
under or in respect of the Credit Agreement, Notes and Security Documents.
Section 2. Obligations Under the Guaranty . The undersigned hereby agrees, as of the date first above written, to be bound as a
Guarantor by all of the terms and conditions of the Guaranty to the same extent as each of the other Guarantors thereunder. The undersigned
further agrees, as of the date first above written, that each reference in the Guaranty to an “ Additional Guarantor ” or a “ Guarantor ” shall also
mean and be a reference to the undersigned, and each reference in Credit Agreement, Notes and Security Documents to a “ Guarantor ” or a “
Security Party ” shall also mean and be a reference to the undersigned.
Section 3. Representations and Warranties . The undersigned hereby makes each representation and warranty set forth in Section 6 of
the Guaranty to the same extent as each other Guarantor.
Section 4. Delivery by Facsimile or Electronic Mail . Delivery of an executed counterpart of a signature page to this Guaranty
Supplement by facsimile or electronic mail shall be effective as delivery of an original executed counterpart of this Guaranty Supplement.
Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc . (a) This Guaranty Supplement shall be governed by, and
construed in accordance with, the laws of the State of New York.
(b) The undersigned hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of
any New York State court or any federal court of the United States of America sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this Guaranty Supplement, the Guaranty, the Credit Agreement, the Notes or the
Security Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and the undersigned hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. The undersigned agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Guaranty Supplement, the Guaranty, the Credit Agreement, the Notes or the Security Documents shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Guaranty Supplement, the Guaranty, the Credit Agreement, the Notes or the
Security Documents to which it is or is to be a party in the courts of any other jurisdiction.
(c) The undersigned irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection
that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty Supplement,
the Guaranty, the Credit Agreement, the Notes or the Security Documents to which it is or is to be a party in any New York State or federal
court. The undersigned hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court.
(d) Each Guarantor agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by
registered mail or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address set forth in the
Credit Agreement or at such other address of which the Administrative Agent shall have been notified pursuant thereto.
(e) Each Guarantor agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction.
(f) THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THE CREDIT AGREEMENT, THE NOTES OR THE SECURITY DOCUMENTS, THE ADVANCES OR THE ACTIONS
OF ANY CREDITOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Very truly yours,
[NAME OF ADDITIONAL GUARANTOR]
By
Name:
Title:
EXHIBIT 7
FORM OF PLEDGE AGREEMENT
PLEDGE AGREEMENT
, 20
DATED
FROM
ERA GROUP INC. and ERA AEROLEO LLC
AS PLEDGORS
TO
AS PLEDGEE
TABLE OF CONTENTS
Page
SECTION 1.
Pledge
2
SECTION 2.
Security for Obligations
2
SECTION 3.
Delivery of Pledged Collateral
2
SECTION 4.
Representations and Warranties; Covenant
2
SECTION 5.
Further Assurances
4
SECTION 6.
Voting Rights; Distributions, etc. Respecting Companies
4
SECTION 7.
Transfers and Other Liens; Additional Membership Interests
5
SECTION 8.
Pledgee May Perform; Reasonable Care
5
SECTION 9.
Remedies
5
SECTION 10.
Expenses
6
SECTION 11.
Security Interest Absolute
6
SECTION 12.
Amendments, Etc.; Pledge Supplements
6
SECTION 13.
Addresses for Notices
6
SECTION 14.
Continuing Security Interest
7
SECTION 15.
Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
7
SECTION 16.
Counterparts
8
SECTION 17.
Severability
8
SECTION 18.
Entire Agreement
8
-i-
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of
, 20
(as amended, amended and restated, supplemented or otherwise
modified from time to time, this “Pledge Agreement”), is made by ERA GROUP INC., a Delaware corporation (the “Borrower”), and ERA
AEROLEO LLC, a Delaware limited liability company (the “Pledgors” and each a “Pledgor”), in favor of WELLS FARGO BANK,
NATIONAL ASSOCIATION, as administrative agent on behalf of the Lenders (together with its successors and assigns, the “Pledgee”). Terms
used herein and not otherwise defined herein are used as defined in the Credit Agreement (as defined below).
PRELIMINARY STATEMENTS:
(1) The Pledgors are the registered owners of one hundred percent (100%) of the membership interests of each of the companies
indicated opposite their names on Schedule III hereto (the “Companies” and individually, a “Company”). Each applicable Company has such
authorized, issued and outstanding membership interests as is set forth on Schedule III hereto. The membership interests in each of the applicable
Companies are collectively called the “Membership Interests” herein.
(2) Pursuant to the senior secured revolving credit facility agreement dated as of
, 20
(the “Credit Agreement”) made
by and among (1) the Borrower, as borrower, (2) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE
BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers, (3) WELLS
FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON
HUMPHREY, INC. and REGIONS BANK, as bookrunners, (4) the Pledgee, as administrative agent, (5) JPMORGAN CHASE BANK, N.A., as
syndication agent, (6) DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK and REGIONS BANK, as co-documentation agents,
COMPANY, as managing agents, (8) Wells Fargo Bank, National Association, as swing line bank (the “Swing Line Bank”) and (9) the banks
and financial institutions whose names and addresses are set out in Schedule A thereto (together with any assignee thereof pursuant to Section 11
thereto and the Swing Line Bank, the “Lenders”, and each a “Lender”), the Lenders have agreed to make available to the Borrower a revolving
credit facility in the amount of Three Hundred Fifty Million United States Dollars (US$350,000,000), subject to the terms and conditions set
forth therein.
(3) It is a condition under the Credit Agreement to the Lenders providing the Credit Facility that each of the Pledgors pledges to the
Pledgee all of its respective Membership Interests in each applicable Company.
(4) The Pledgors in order to secure the Security Parties’ obligations under the Credit Agreement has duly authorized the execution
and delivery of this Pledge Agreement.
NOW, THEREFORE, to secure the prompt payment and performance of the obligations under the Credit Agreement and the
performance and observance of all agreements, covenants and provisions contained herein, the Pledgors, jointly and severally, hereby agree as
follows:
SECTION 1. Pledge . The Pledgors hereby pledge to the Pledgee, and grant to the Pledgee a security interest in, the following (the “
Pledged Collateral ”):
(a) (i) the Membership Interests and any certificates representing such Membership Interests, and all distributions, cash, instruments
and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the
Membership Interests;
(ii) all additional Membership Interests that may from time to time be acquired by either Pledgor in any manner, and any certificates
representing such additional Membership Interests, and all cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such additional Membership Interests; and
(iii) any proceeds of any of the foregoing.
Promptly upon receipt of any additional Membership Interests referred to in paragraph (a)(ii) above, the applicable Pledgor will deliver such
Membership Interests to the Pledgee in pledge hereunder.
SECTION 2. Security for Obligations . This Pledge Agreement secures the payment and performance of the Security Parties’
obligations pursuant to the terms of the Credit Agreement, Notes and Security Documents.
SECTION 3. Delivery of Pledged Collateral . Each of the Pledgors herewith delivers to the Pledgee fully completed, undated interest
transfers, substantially in the form attached hereto as Schedule I, executed by the applicable Pledgor and duly evidencing the transfer by way of
security interest of the Pledged Collateral to, and in the name of, the Pledgee or of a nominee for, and chosen by, the Pledgee. Each of the
Pledgors agrees to take the same action with respect to any further Membership Interest constituting Pledged Collateral forthwith upon the
receipt thereof by such Pledgor.
SECTION 4. Representations and Warranties; Covenant . (a) The Pledgors, jointly and severally, represent and warrant (and such
representations and warranties shall be deemed repeated on the date of each Advance under the Credit Agreement) as follows:
(i) Each of the Pledgor is a corporation or limited liability company, duly incorporated or organized (as the case may be), validly
existing and in good standing under the laws of the State of Delaware. The execution, delivery and performance by the Pledgors of this
Pledge Agreement (i) are within the Pledgors’ corporate powers and have been duly authorized by all necessary corporate action, (ii) do
not contravene the Pledgors’ constitutional documents or any law or any contractual restriction binding on or affecting the Pledgors,
(iii) do not require any authorization or approval (including
2
exchange control approval) or other action by, or any notice to or filing with, any Government Entity and (iv) except for the liens created
by this Pledge Agreement, do not result in or require the creation or imposition of any lien upon or with respect to any of the properties or
assets of either of the Pledgors or the applicable Company. This Pledge Agreement is the legal, valid and binding obligation of each of the
Pledgors enforceable against each of the Pledgors in accordance with its terms, except as (i) the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights and (ii) by equitable
principles (regardless of whether enforcement is sought in equity or at law) but not excepting fraudulent conveyance laws.
(ii) Each of the Companies is a limited liability company, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation.
(iii) There is no tax, levy, impost, deduction, charge or withholding imposed by the jurisdiction of incorporation or formation (as the
case may be) of either of the Pledgors on either of the Pledgors either (i) on or by virtue of the execution, delivery or performance of this
Pledge Agreement or any other document to be furnished hereunder or (ii) on any payment to be made by either of the Pledgors pursuant to
this Pledge Agreement.
(iv) The Pledged Collateral has been duly authorized and validly issued and is fully paid and non-assessable; each of the Pledgors is
the legal and beneficial owner of its respective Pledged Collateral as indicated on Schedule III hereto free and clear of any lien, security
interest, option or other charge or encumbrance or preferential arrangement except for the security interest created by this Pledge
Agreement. The pledge of the Pledged Collateral pursuant to this Pledge Agreement creates a valid and duly perfected first priority pledge
of and security interest in the Pledged Collateral, securing the payment and performance of the Security Parties’ obligations under the
Credit Agreement, Notes and Security Documents.
(v) With respect to each Company, the Pledged Collateral constitutes the only issued and outstanding Membership Interests of the
applicable Company.
(vi) The statements contained in preliminary statements (1) – (4) are true, correct and complete.
(vii) If an Event of Default shall have occurred and be continuing, upon receipt of instruction by the Pledgee, each of the Pledgors
agrees to cause its respective Pledged Collateral to be duly registered on the books of the applicable Company in the name of the Pledgee,
its nominee, or as otherwise directed by the Pledgee.
(viii) None of the Companies have issued certificates evidencing the ownership interests of the members in such Companies.
(b) Each of the Pledgors covenants and agrees that it will not do or permit to be done any act, or fail to perform any act, that may
materially depreciate, jeopardize or otherwise prejudice the market value of the Pledged Collateral or impair the rights or security of the Pledgee
hereunder.
3
SECTION 5. Further Assurances . Each of the Pledgors agrees that at any time and from time to time, at the expense of the Pledgors,
the Pledgors will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or
desirable, or that the Pledgee may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to
enable the Pledgee to exercise and enforce its rights (including, without limitation, the registration of the Pledged Collateral in the name of the
Pledgee or its nominee) and remedies hereunder with respect to any Pledged Collateral, such exercise to be subject to Section 9(a) hereof. In the
event any of the Companies issue certificates evidencing ownership interests in such Companies, the Pledgors shall immediately deliver said
certificates to the Pledgee to be held in accordance with and pursuant to the terms and conditions of this Agreement.
SECTION 6. Voting Rights; Distributions, etc. Respecting Companies . With respect to each Company,
(a) Irrevocable Proxy . Each of the Pledgors hereby agrees to grant, and does hereby grant, to the Pledgee for the benefit of the
Pledgee, an irrevocable proxy in the form attached hereto as Schedule II to (i) vote or cause to be voted any and all of the Pledged Collateral and
(ii) give or cause to be given consents, waivers and ratifications in respect thereof. Each such proxy shall be valid until payment and performance
in full of the obligations under the Credit Agreement, Notes and Security Documents. The Pledgee hereby agrees that until and unless an Event
of Default (as defined in Section 9(a) hereof) shall have occurred and be continuing, the Pledgee shall not exercise any of such proxies and,
subject always to the provisions of Section 6 hereof, the Pledgors shall be entitled to (i) vote or cause to be voted any and all of the Pledged
Collateral and (ii) give, or cause to be given, consents, waivers and ratifications in respect thereof, provided , however , that neither of the
Pledgors shall vote for or give any consent, waiver or ratification that would be inconsistent with any provisions of the Credit Agreement, Notes
or Security Documents or that would result in a Material Adverse Change relating to the value of the Pledged Collateral or any part thereof. All
such rights of the Pledgors to vote, or cause to be voted and to give, or cause to be given, consent, waivers and ratifications shall cease
automatically in case an Event of Default shall occur and so long as it is continuing, and upon the Pledgee giving written notice to such effect to
the Pledgors, all such rights shall thereupon revert to the Pledgee, which, in its sole discretion, shall have the sole and exclusive right and
authority (but shall not be bound) to exercise such voting and consensual rights and powers. Each of the Pledgors further agrees to execute
irrevocable proxies in the form attached hereto as Schedule II.
(b) Distributions . If an Event of Default shall have occurred and be continuing, upon the Pledgee’s request, each of the Pledgors
shall deliver, or permit to be delivered, and shall instruct each applicable Company to deliver, to the Pledgee to such account as the Pledgee may,
from time to time, designate in writing, any and all dividends or distributions paid in respect of the Pledged Collateral.
4
SECTION 7. Transfers and Other Liens; Additional Membership Interests . (a) Each of the Pledgor agrees that it will not (i) sell or
otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral or (ii) create or permit to exist any Lien, security interest,
or other charge or encumbrance or preferential arrangement upon or with respect to any of the Pledged Collateral, except for the security
interests under this Pledge Agreement.
(b) Each of the Pledgors agrees that it will cause the applicable Company not to issue any Membership Interests whatsoever, whether
in addition to or in substitution for the relevant Pledged Collateral, or any other issued or authorized Membership Interests of the applicable
Company, without the Pledgee’s prior written consent, except for Pledged Collateral in favor of the Pledgors that are pledged hereunder.
SECTION 8. Pledgee May Perform; Reasonable Care . (a) If either of the Pledgor fails to perform any agreement contained herein,
the Pledgee may itself perform, or cause performance of, such agreement, and such performance shall not relieve such Pledgor of any default in
respect of such Pledgor’s failure, and the expenses of the Pledgee incurred in connection therewith shall be payable by the Pledgors under
Section 10 hereof.
(b) The Pledgee shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal to that which the Pledgee accords its own property, it being
understood that the Pledgee shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral, whether or not the Pledgee has or is deemed to have knowledge of such
matters, or (ii) lifting any Liens or taking any necessary steps to preserve rights against any Person, in each case with respect to any Pledged
Collateral.
SECTION 9. Remedies . (a) Notwithstanding anything to the contrary stated herein, the Pledgee shall not exercise any of the
remedies set forth in this Pledge Agreement unless and until an Event of Default has occurred and is continuing under the Credit Agreement (an
“ Event of Default ”).
(b) If an Event of Default shall have occurred and be continuing:
(i) The Pledgee may (but shall not be bound to) exercise in respect of the Pledged Collateral, in addition to other rights and remedies
provided for herein or in the Credit Agreement, Notes or Security Documents or otherwise available to it, all the rights and remedies of a
secured party after default under the law of the State of New York or any other applicable law in effect at that time. The Pledgee may also,
without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at
any of the Pledgee’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Pledgee may deem
commercially reasonable, provided that at least ten (10) days’ prior written notice of the time and place of any such sale shall be given to
the Pledgors. The Pledgee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so adjourned.
5
(ii) Any cash held by the Pledgee as Pledged Collateral and all cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Pledgee, be held by the
Pledgee as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Pledgee pursuant to
Section 10) in whole or in part by the Pledgee against, all or any part of the Security Parties’ obligations under the Credit Agreement,
Notes and Security Documents. Any surplus of such cash or cash proceeds held by the Pledgee and remaining after payment and
performance in full of such obligations shall be paid over to the Borrower or its order.
SECTION 10. Expenses . The Pledgors upon demand will pay to the Pledgee the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and agents, that the Pledgee may reasonably incur in connection
with (i) the administration of this Pledge Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon,
any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure by any Pledgor to
perform or observe any of the provisions hereof.
SECTION 11. Security Interest Absolute . All rights of the Pledgee and security interests hereunder, and all obligations of the
Pledgors hereunder, shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Credit Agreement, Notes
or Security Document or any other agreement or instrument delivered pursuant or relating thereto, (ii) any amendment to the Credit Agreement,
Notes or Security Document or any other agreement or instrument delivered pursuant or relating thereto, or (iii) any other circumstance which
might otherwise constitute a defense available to, or a discharge of, either Pledgor in respect of its obligations under the Credit Agreement, Notes
or Security Documents or this Pledge Agreement.
SECTION 12. Amendments, Etc.; Pledge Supplements . (a) No amendment or waiver of any provision of this Pledge Agreement nor
consent to any departure by either of the Pledgors herefrom shall in any event be effective unless the same shall be in writing and signed by the
Pledgors and the Pledgee, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which
given.
SECTION 13. Addresses for Notices . All notices and other communications provided for hereunder shall be in writing (including
email or facsimile) and sent by a prepaid nationally recognized overnight courier, e-mailed or facsimiled, or delivered:
(i) if to the Pledgors:
c/o Seacor Holdings Inc.
460 Park Avenue, 12th Floor
New York, NY 10022
Attention: Dick Fagerstal
Facsimile No.: 212 582 8522
6
(ii) if to the Pledgee:
MAC D1109-019
Charlotte, NC 28262
Facsimile No.: 704-590-2782
with a copy to:
1000 Louisiana Street, 9th Floor
MAC T0002-090
Houston, TX 77002
Attention: Corbin Womac, Vice President & Relationship Manager
Facsimile No.: 713-739-1087
or as to any party at such other address as shall be designated by such party in a written notice to the other parties complying as to delivery with
the terms of this Section 13. All such notices and communications shall, when mailed, be sent by a nationally recognized overnight courier, or emailed or facsimiled, be effective when deposited in the mails, delivered to such courier, or e-mailed or facsimiled, respectively. Delivery by
electronic mail or facsimile of an executed counterpart of any amendment or waiver of any provision of this Pledge Agreement or of any
Schedule hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. All notices and
communications given under this Pledge Agreement, unless submitted in the English language, shall be accompanied by one English translation
for each copy of the foregoing so submitted; provided, that the English version of all such notices, communications, evidences and other
documents shall govern in the event of any conflict with the non-English version thereof.
SECTION 14. Continuing Security Interest . This Pledge Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until payment and performance in full of the Security Parties’ obligations under the Credit
Agreement, Notes and Security Documents, (ii) be binding upon each of the Pledgors, its respective successors and assigns, and (iii) inure to the
benefit of the Pledgee on behalf of the Creditors and the Pledgee’s successors and such transferees and assigns as may be permitted under the
Credit Agreement. Upon the payment and performance in full of the Security Parties’ obligations under the Credit Agreement, Notes and
Security Documents, the Pledgors shall be entitled to the return, upon their request and at their expense, of such of the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 15. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc . (a) This Pledge Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
7
(b) Each of the Pledgors hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United
States District Court for the Southern District of New York in any action or proceeding brought against it by the Agents and the Lenders under
this Pledge Agreement or under any document delivered hereunder and each of the Pledgors hereby irrevocably appoints Farkouh, Furman &
Faccio, LLP, 460 Park Avenue, 12 th Floor, New York, NY 10022 (Attention: Fred Farkouh), its attorney-in-fact and agent for service of
summons or other legal process thereon, which service may be made by serving a copy of any summons or other legal process in any such action
or proceeding on such agent and such agent is hereby authorized and directed to accept by and on behalf of each of the Pledgors service of
summons and other legal process of any such action or proceeding against either of the Pledgors. The service, as herein provided, of such
summons or other legal process in any such action or proceeding shall be deemed personal service and accepted by each of the Pledgors as such,
and shall be legal and binding upon each of the Pledgors for all the purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness of either of the Pledgors to any Agent
or Lender) against either of the Pledgors in any such legal action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment. Each of the Pledgors will advise the Administrative Agent promptly of any change of address of the foregoing agent or of
the substitution of another agent therefor. In the event that the foregoing agent or any other agent appointed by either of the Pledgors shall not be
conveniently available for such service or if a Pledgor fails to maintain an agent as provided herein, each of the Pledgors hereby irrevocably
appoints the person who then is the Secretary of State of the State of New York as such attorney-in-fact and agent. Each of the Pledgors will
advise the foregoing agent of the appointment made hereby, but failure to so advise shall not affect the appointment made hereby.
Notwithstanding anything herein to the contrary, the Agents and the Lenders may bring any legal action or proceeding in any other appropriate
jurisdiction.
(c) IT IS MUTUALLY AGREED BY AND AMONG THE PLEDGORS, THE AGENTS AND THE LENDERS THAT EACH OF
THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS PLEDGE AGREEMENT.
SECTION 16. Counterparts . This Pledge Agreement may be executed by the parties hereto on separate counterparts, each of which
shall constitute one and the same instrument.
SECTION 17. Severability . Invalidity, unenforceability, or invalidation of any one or more of the provisions of this Pledge
Agreement for any reason shall in no way affect any other provisions hereof, which other provisions shall remain in full force and effect.
SECTION 18. Entire Agreement . This Pledge Agreement and the documents herein mentioned contain, or expressly incorporate, the
entire agreement of the parties with respect to the subject matter hereof.
8
IN WITNESS WHEREOF each of the parties hereto has caused this Pledge Agreement to be duly executed and delivered by its
officer thereunto duly authorized as of the date first above written.
PLEDGORS
ERA GROUP INC.
By:
Name:
Title:
ERA AEROLEO LLC
By:
Name:
Title:
PLEDGEE
By:
Name:
Title:
By:
Name:
Title:
SCHEDULE I TO PLEDGE AGREEMENT
INTEREST TRANSFER 1
100% of its
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
limited liability company membership interest in [
], a Delaware limited liability company (the “ Company ”), standing in the name of the
undersigned on the books of said Company, and does hereby irrevocably constitute and appoint
as attorney-infact of the undersigned to transfer said membership interest on the books of the Company with full power of substitution in the premises.
Dated:
[ERA GROUP INC.]/[ERA AEROLEO LLC]
By:
Name:
Title:
In presence of:
Witness
1
Original counterparts of this Interest Transfer to be executed will equal the number of Companies (e.g. one Interest Transfer to be executed
per Company).
SCHEDULE II TO PLEDGE AGREEMENT
IRREVOCABLE PROXY 2
The undersigned hereby constitutes and appoints WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent,
in its capacity as Pledgee under the Pledge Agreement hereinafter referred to, its attorney and proxy to appear, vote and otherwise act, all in the
name, place and stead of the undersigned in the same manner that the undersigned might do and with the same powers, with respect to all of the
membership interests in [insert name] (the “ Company ”), owned or hereafter acquired by the undersigned, at any and all meetings of the
members or the managers, as the case may be, of the Company, on any and all matters, questions and resolutions that may come before such
meetings, including, but not limited to, the election of directors or managers, if any, or at any adjournment or adjournments thereof, or to consent
on behalf of the undersigned in the absence of a meeting to anything that might have been voted on at such a meeting.
This irrevocable proxy is coupled with an interest, is given in connection with a pledge pursuant to a Pledge Agreement dated
, 20
(the “ Pledge Agreement ”), is subject to the rights of the undersigned as the Pledgor set forth in Section 6(a) of the Pledge
Agreement and is irrevocable. It shall continue in effect so long as the debt for which the pledge is granted as security remains unpaid.
The attorney and proxy named herein is hereby given full power of substitution and revocation and may act through such agents,
nominees or substitute attorneys as it may from time to time appoint.
The powers of such attorney and proxy shall include (without limiting its general powers hereunder) the power to receive and waive
any notice of any meeting on behalf of each of the undersigned.
[ERA GROUP INC.]/[ERA AEROLEO LLC]
By:
Name:
Title:
2
Original counterparts of this Irrevocable Proxy to be executed will equal the number of Companies (e.g. one Irrevocable Proxy per
Company).
SCHEDULE III TO PLEDGE AGREEMENT
Percentage of Total
Company Membership
Name of Pledgor
Name of Company
Company Jurisdiction
of Formation
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Group Inc.
Era Aeroleo LLC
Era Helicopters, LLC
Era Leasing LLC
Era Med LLC
Era Aeroleo LLC
Era Canada LLC
Era DHS LLC
Era FBO LLC
Era Flightseeing LLC
Era Helicopters (Mexico) LLC
Era Helicopter Services LLC
Aeroleo Internacional, LLC
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Interest Pledged
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
EXHIBIT 8
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT
Dated
, 20__
from
The Grantors referred to herein
as Grantors
to
as Grantee
TABLE OF CONTENTS
Section
Page
Section 1.
Grant of Security
2
Section 2.
Security for Obligations
3
Section 3.
Grantors Remain Liable
4
Section 4.
Maintaining the Account Collateral
4
Section 5.
5
Section 6.
Further Assurances
6
Section 7.
As to Equipment
7
Section 8.
Insurance
8
Section 9.
Negative Pledge
8
Section 10.
Post-Closing Changes; Collections on Receivables and Related Contracts
8
Section 11.
Grantee Appointed Attorney in Fact
9
Section 12.
Grantee May Perform
9
Section 13.
The Grantee’s Duties
9
Section 14.
Remedies
9
Section 15.
Indemnity and Expenses
11
Section 16.
Amendments; Waivers; Additional Grantors; Etc.
11
Section 17.
Notices, Etc.
11
Section 18.
Continuing Security Interest; Assignments under the Credit Agreement
11
Section 19.
Security Interest Absolute
12
Section 20.
Execution in Counterparts
12
Section 21.
Governing Law
12
i
Schedules
Schedule I
Schedule II
Schedule III
Schedule IV
-
Type of Organization, Jurisdiction of Organization and Organizational Identification Number
Locations of Equipment and Inventory
Letters of Credit
Pledged Deposit Accounts
-
Form of Security Agreement Supplement
Form of Deposit Account Control Agreement
Exhibits
Exhibit A
Exhibit B
ii
SECURITY AGREEMENT
SECURITY AGREEMENT dated
, 20
(as it may be amended, restated, supplemented or otherwise modified
from time to time, this “Agreement”) made by and among (i) ERA GROUP INC., a Delaware corporation, (the “Borrower”), and the other
Persons listed on the signature pages hereof (the Borrower and the Persons so listed being, collectively, the “Grantors”) and (ii) WELLS FARGO
BANK, NATIONAL ASSOCIATION, as grantee (the “Grantee”).
PRELIMINARY STATEMENTS:
, 20
(the “Credit Agreement”)
(1) Pursuant to the senior secured revolving credit facility agreement dated as of
made by and among (1) the Borrower, (2) WELLS FARGO SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK
SECURITIES INC., SUNTRUST ROBINSON HUMPHREY, INC. and REGIONS BANK, as mandated lead arrangers, (3) WELLS FARGO
SECURITIES, LLC, JPMORGAN CHASE BANK, N.A., DEUTSCHE BANK SECURITIES INC., SUNTRUST ROBINSON HUMPHREY,
INC. and REGIONS BANK, as bookrunners, (4) the Grantee, as administrative agent, (5) JPMORGAN CHASE BANK, N.A., as syndication
agent, (6) DEUTSCHE BANK SECURITIES INC., SUNTRUST BANK and REGIONS BANK, as co-documentation agents, (7) COMPASS
BANK, WHITNEY BANK, GOLDMAN SACHS BANK USA, COMERICA BANK and THE NORTHERN TRUST COMPANY, as managing
agents, (8) Wells Fargo, as swing line bank (the “Swing Line Bank”) and (9) the banks and financial institutions whose names and addresses are
set out in Schedule A thereto (together with any assignee thereof pursuant to Section 11 thereto and the Swing Line Bank, the “Lenders”, and
each a “Lender”), the Lenders have agreed to make available to the Borrower a revolving credit facility in the amount of Three Hundred Fifty
Million United States Dollars (US$350,000,000), subject to the terms and conditions set forth therein.
(2) Each Grantor is the owner of the deposit accounts (the “Pledged Deposit Accounts”) set forth opposite such Grantor’s name on
Schedule IV hereto.
(3) It is a condition under the Credit Agreement to the Lenders providing the Credit Facility that the Grantors shall have granted the
security interest contemplated by this Agreement.
(4) Terms defined in the Credit Agreement and not otherwise defined in this Agreement are used in this Agreement as defined in the
Credit Agreement. Further, unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC
(as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9. “UCC” means the Uniform Commercial Code as
in effect from time to time in the State of New York; provided that, if perfection or the effect of perfection or non perfection or the priority of the
security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York,
“UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof
relating to such perfection, effect of perfection or non perfection or priority.
NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Advances under the Credit
Agreement from time to time, the Grantors and the Grantee, for the benefit of the Creditors, agree as follows:
Section 1. Grant of Security . Each Grantor hereby grants to the Grantee, for the benefit of the Creditors, a security interest in such
Grantor’s right, title and interest in and to the following, in each case, as to each type of property described below, whether now owned or
hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising other than any of the below that relates to
the U.S. Bancorp Helicopters (collectively, the “Collateral”):
(a) all equipment in all of its forms, including, without limitation, all machinery, tools, furniture, and all parts thereof and all
accessions thereto, including, without limitation, computer programs and supporting information that constitute equipment within the
meaning of the UCC (any and all such property being the “Equipment”);
(b) all inventory in all of its forms, including, without limitation, (i) all raw materials, work in process, finished goods and materials
used or consumed in the manufacture, production, preparation or shipping thereof, (ii) goods in which such Grantor has an interest in mass
or a joint or other interest or right of any kind (including, without limitation, goods in which such Grantor has an interest or right as
consignee) and (iii) goods that are returned to or repossessed or stopped in transit by such Grantor), and all accessions thereto and products
thereof and documents therefor, including, without limitation, computer programs and supporting information that constitute inventory
within the meaning of the UCC (any and all such property being the “Inventory”);
(c) all accounts, chattel paper (including, without limitation, tangible chattel paper and electronic chattel paper), instruments
(including, without limitation, promissory notes), deposit accounts, letter-of-credit rights, general intangibles (including, without
limitation, payment intangibles) and other obligations of any kind, whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services and whether or not earned by performance, and all rights now or hereafter existing in and to all
supporting obligations and in and to all security agreements, mortgages, Liens, leases, letters of credit and other contracts securing or
otherwise relating to the foregoing property (any and all of such accounts, chattel paper, instruments, deposit accounts, letter-of-credit
rights, general intangibles and other obligations, to the extent not referred to in clause (d) below, being the “Receivables,” and any and all
such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related
Contracts”);
(d) the following (collectively, the “Account Collateral”):
(i) the Pledged Deposit Accounts and all funds and financial assets from time to time credited thereto (including, without
limitation, all Cash Equivalents), and all certificates and instruments, if any, from time to time representing or evidencing the
Pledged Deposit Accounts;
2
(ii) all promissory notes, certificates of deposit, checks and other instruments from time to time delivered to or otherwise
possessed by the Grantee for or on behalf of such Grantor in substitution for or in addition to any or all of the then existing Account
Collateral; and
(iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral;
(e) all books and records (including, without limitation, customer lists, credit files, printouts and other computer output materials and
records) of the Grantors pertaining to any of the Collateral;
(f) the Mortgaged Helicopters;
(g) (i) any lease or other contract to which it is a party now or hereafter entered into by such Grantor in respect of any Mortgaged
Helicopter, (ii) all moneys and claims for moneys due and to become due thereto, whether as rent, loans, indemnities, payments or
otherwise, under, and all claims for damages arising out of any breach of, any lease, other contract for the use or employment of any
Mortgaged Helicopter, and (iii) any money or non-money proceeds of a Mortgaged Helicopter arising from the total or partial loss or
physical destruction of such Mortgaged Helicopter or its total or partial confiscation, condemnation or requisition;
(h) all policies and contracts of insurance which are from time to time taken out by or for such Grantor in respect of any Mortgaged
Helicopter (including Airframes and Engines), machinery, disbursements, profits or otherwise, and all the benefits thereof, including,
without limitation, all claims of whatsoever nature, as well as return premiums;
(i) all Helicopter Related Documents and Records including books, records, account ledgers, data processing records, computer
software and other property and general intangibles at any time evidencing or relating to any of the foregoing; and
(j) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and
supporting obligations relating to, any and all of the Collateral (including, without limitation, proceeds, collateral and supporting
obligations that constitute property of the types described in clauses (a) through (i) of this Section 1) and, to the extent not otherwise
included, all (A) payments under insurance (whether or not the Grantee is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, and (B) cash.
Section 2. Security for Obligations . This Agreement secures the payment of all obligations of each Grantor now or hereafter existing
under (i) the Credit Agreement, Notes, and Security Documents, (ii) credit cards, purchasing cards and other treasury management services it
holds with any of the Lenders and (iii) obligations in respect of hedge agreements, whether direct or indirect, absolute or contingent, and whether
for principal, reimbursement
3
obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such obligations
being the “Secured Obligations”). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that
constitute part of the Secured Obligations and would be owed by each Grantor to any Creditor under the Credit Agreement, Notes and Security
Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving a Security Party.
Section 3. Grantors Remain Liable . Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Grantee of any of the rights hereunder shall not
release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Creditor shall
have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or the Credit
Agreement, Notes and Security Documents, nor shall any Creditor be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
Section 4. Maintaining the Account Collateral . So long as any Advance or any other obligation of any Security Party under the
Credit Agreements, Notes or any Security Document shall remain unpaid or any Lender shall have any Commitment:
(a) Each Grantor will maintain deposit accounts only with the financial institution acting as Grantee hereunder or with a bank (a
“Pledged Account Bank”) that has agreed with such Grantor and the Grantee to comply with instructions originated by the Grantee
directing the disposition of funds in such deposit account without the further consent of such Grantor, such agreement to be substantially in
the form of Exhibit B hereto or otherwise in form and substance satisfactory to the Grantee (a “Deposit Account Control Agreement”). The
Grantee agrees that (x) it will deliver Notices of Exclusive Control (as defined in each Deposit Account Control Agreement) only upon the
occurrence and during the continuance of an Event of Default and (y) if it has delivered any such Notice of Exclusive Control and
thereafter no Event of Default is continuing, the Grantee shall promptly withdraw the same.
(b) Upon any termination by a Grantor of any Pledged Deposit Account, such Grantor will immediately (i) transfer all funds and
property held in such terminated Pledged Deposit Account to another Pledged Deposit Account and (ii) notify all obligors that were
making payments to such Pledged Deposit Account to make all future payments to another Pledged Deposit Account, in each case so that
the Grantee shall have a continuously perfected security interest in such Account Collateral, funds and property.
(c) Upon the occurrence of an Event of Default, the Grantee shall have sole right to direct the disposition of funds with respect to the
Pledged Deposit Accounts, and it shall be a term and condition of each of the Pledged Deposit Accounts, notwithstanding any term or
condition to the contrary in any other agreement relating to
4
the Pledged Deposit Accounts, that, following delivery by the Grantee of a Notice of Exclusive Control (as defined in the applicable
Deposit Account Control Agreement) to a Pledged Account Bank, no amount (including, without limitation, interest on Cash Equivalents
credited thereto) will be paid or released to or for the account of, or withdrawn by or for the account of, any Grantor or any other Person
from the Pledged Deposit Accounts, unless and until such Notice of Exclusive Control is withdrawn.
(d) Upon the occurrence and during the continuance of an Event of Default, the Grantee may, at any time and without notice to, or
consent from, the Grantor, transfer, or direct the transfer of, funds from the Pledged Deposit Accounts to satisfy the Grantor’s obligations
under the Credit Agreement, Notes or Security Documents. The Grantee agrees to notify the Grantor promptly after any such transfer
indicating the amount so transferred and the Grantor’s obligations so satisfied.
Section 5. Representations and Warranties . Each Grantor represents and warrants as follows:
(a) Each Grantor’s exact legal name, type of organization, jurisdiction of organization and organizational identification number is set
forth in Schedule I hereto. References to any Schedule in this Section 5 shall refer to such Schedule as the same may be amended from
time to time by notice from the Grantors to the Grantee.
(b) Each Grantor is the legal and beneficial owner of the Collateral granted or purported to be granted by it free and clear of any Lien,
claim, option or right of others, except for the security interest created under this Agreement or permitted under the Credit Agreement. No
effective financing statement or other instrument similar in effect covering all or any part of such Collateral or listing any Grantor is on file
in any recording office, except such as may have been filed in favor of the Grantee relating to the Credit Agreement, Notes and Security
Documents or as otherwise permitted under the Credit Agreement.
(c) All of the Equipment and Inventory constituting Collateral granted by such Grantor is located at the places specified therefor in
Schedule II hereto or at another location as to which such Grantor has complied with the requirements of Section 7(a). Since the date of its
formation, such Grantor has not changed the location of its Equipment or Inventory constituting Collateral granted by it. Such Grantor has
exclusive possession and control of its Equipment and Inventory constituting collateral granted by it, other than Inventory stored at any
leased premises or warehouse to which the Grantor has full access.
(d) None of the Receivables constituting Collateral granted by it is evidenced by a promissory note or other instrument that has not
been delivered to the Grantee other than ordinary course collections on any such Receivables that are deposited in a Pledged Deposit
Account in accordance with Section 4.
5
(e) Such Grantor has no deposit accounts, other than the Pledged Deposit Accounts listed on Schedule IV hereto and additional
Pledged Deposit Accounts as to which such Grantor has complied with the applicable requirements of Section 4.
(f) Such Grantor is not a beneficiary or assignee under any letter of credit, other than the letters of credit described in Schedule III
hereto.
(g) This Agreement creates in favor of the Grantee for the benefit of the Creditors a valid security interest in the Collateral granted by
such Grantor, securing the payment of the Secured Obligations; all filings and other actions (including, without limitation, (A) actions
necessary to obtain control of Collateral as provided in Sections 9-104, 9-106 and 9-107 of the UCC and (B) actions necessary to perfect
the Grantee’s security interest with respect to Collateral evidenced by a certificate of title, if any) necessary to perfect the security interest
in the Collateral granted by such Grantor have been duly made or taken and are in full force and effect; and such security interest is first
priority.
(h) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or
any other third party is required for (i) the grant by such Grantor of the security interest granted by such Grantor hereunder or for the
execution, delivery or performance of this Agreement by such Grantor, (ii) the perfection or maintenance of the security interest created
hereunder (including the first priority nature of such security interest), except for (x) the filing of financing and continuation statements
under the UCC, which financing statements have been duly filed and are in full force and effect, the (y) the recordation of the Mortgages
over the Mortgaged Helicopters with the FAA and any other applicable Acceptable Jurisdiction and (z) the registration of Creditors’
International Interest on the Mortgaged Helicopters with the International Registry, or (iii) th

SEACOR HOLDINGS INC /NEW/

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